[Verse 1]
When you're building out a DCF model today
Need to find the rate to discount cash away
WACC's the weighted average cost we seek
Debt and equity combined to make complete
Take the cost of debt times one minus tax rate
Add equity cost weighted by their stake
Market values matter not the book amount
This becomes your universal discount
[Chorus]
WACC brings future cash to present day
Terminal value shows the long-term way
Perpetuity growth or exit multiple
Both methods make your DCF more credible
Discount rate foundation, terminal calculation
Together they complete your valuation
[Verse 2]
Beta measures systematic risk exposure
Risk-free rate plus market premium closure
Cost of equity through the CAPM way
While debt cost comes from what the firm will pay
Weight each source by market capitalization
Debt to value and equity's allocation
Sum them up to get your blended rate
This discount factor seals your DCF fate
[Chorus]
WACC brings future cash to present day
Terminal value shows the long-term way
Perpetuity growth or exit multiple
Both methods make your DCF more credible
Discount rate foundation, terminal calculation
Together they complete your valuation
[Bridge]
Terminal value captures all the years
Beyond your forecast when the dust clears
Gordon growth model with perpetual flow
Or comparable multiples that traders know
Divide by WACC minus growth to find
The present value of the tail behind
[Verse 3]
Exit multiples use market comparisons
P-E ratios or EV to EBITDA bonds
Apply to final year projected metrics
To estimate the terminal value mathematics
Both approaches have their strengths and flaws
Choose the method that best fits your cause
Add to present value of forecast years
Your enterprise value then appears
[Chorus]
WACC brings future cash to present day
Terminal value shows the long-term way
Perpetuity growth or exit multiple
Both methods make your DCF more credible
Discount rate foundation, terminal calculation
Together they complete your valuation
[Outro]
From discount rate to terminal estimation
DCF completes your firm's true valuation