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A three-year DCF for a cold-chain logistics firm

You run the case. Read the prompt, answer questions from the notes below, and share data only when the candidate asks for it or gets stuck. Score at the end.

Case timer

00:00

Target length:

1. Read the prompt aloud

Read it slowly, then pause. Let the candidate ask questions before they structure.

A fictional cold-chain logistics firm in Thailand will produce unlevered free cash flow of USD 10 million next year, 11 million the year after and 12.1 million in year 3. After that, cash flow grows 2 percent a year forever. Its WACC is 10 percent. What is its enterprise value, and how much of it comes from the terminal value?

2. Answers to clarifying questions

This case has no scripted clarifying answers. Answer from the prompt, and say "assume what you think is reasonable" if the prompt does not cover it.

3. A model structure

Compare the candidate's structure with this one. A different split can be just as good if it is clean and fits the problem.

EV = value today of years 1 to 3 + value today of the terminal value (this comes from the question: all future cash, in today's money)
- Discount each forecast year: divide by 1.1, 1.21 and 1.331
- Terminal value at the end of year 3: year 4 cash flow divided by (10 percent minus 2 percent)
- Discount the terminal value three years, then add

4. The working, step by step

Each step shows how a strong candidate works it out. Share a new fact from it only when the candidate asks or is stuck, and let them do the math: the result in the dark box is what they should reach.

Step 1: Forecast years
What a strong candidate does: Each year happens to be worth about 9.09 today, because cash flow grows 10 percent a year, the same as the discount rate.
Value today of years 1 to 3 (USD millions): 10 ÷ 1.1 + 11 ÷ 1.21 + 12.1 ÷ 1.331 = 27.27
Step 2: Terminal value
What a strong candidate does: Year 4 cash flow is 12.1 times 1.02, divided by 0.10 minus 0.02.
Terminal value at the end of year 3 (USD millions): 12.1 × 1.02 ÷ (0.1 - 0.02) = 154
Step 3: Terminal value today
What a strong candidate does: Discount it three years.
Terminal value today (USD millions): 12.1 × 1.02 ÷ (0.1 - 0.02) ÷ 1.331 = 116
Step 4: Enterprise value
What a strong candidate does: Add the two parts.
Enterprise value (USD millions): 10 ÷ 1.1 + 11 ÷ 1.21 + 12.1 ÷ 1.331 + 12.1 × 1.02 ÷ (0.1 - 0.02) ÷ 1.331 = 143
Step 5: Share from the terminal value
What a strong candidate does: Terminal value today divided by enterprise value.
Terminal value share of EV (percent): 115.91 ÷ 143.18 × 100 = 80.95
Step 6: Sensitivity
What a strong candidate does: The same model with 3 percent growth after year 3 instead of 2.
Enterprise value at 3 percent growth (USD millions): 10 ÷ 1.1 + 11 ÷ 1.21 + 12.1 ÷ 1.331 + 12.1 × 1.03 ÷ (0.1 - 0.03) ÷ 1.331 = 161

The recommendation to listen for

At the end, say: "The CEO walks in. What is your recommendation?"

The firm is worth about USD 143 million, but about 81 percent of that comes from the terminal value, the years after the forecast. This means the answer rests mostly on two guesses: long-run growth and the discount rate. One extra point of growth lifts the value to about USD 161 million, 12 percent more. The risk is false precision: a DCF can be tuned to any answer. As a next step, show a range for growth and WACC, and check that the implied EV divided by EBITDA is close to what peers trade at.

Score the candidate

Score each criterion from 1 to 5. A 2 or a 4 sits between the descriptions.

This case has no exhibit. Score Exhibit reading on how the candidate used the data you gave them: did they pick out the number that matters and say what it means?

Structuring

1: No clear structure, or a memorized framework that does not fit the problem.
3: A sensible structure, but with some overlap, a gap, or no clear priority.
5: A structure built for this problem, with no overlap and no gaps, a stated hypothesis, and a clear first step.

Math

1: Frequent errors, no units, or needed heavy help to finish.
3: Right answers but slow or messy working, or one error caught late.
5: Accurate and clearly narrated, with units, a sense check, and what the number means.

Exhibit reading

1: Read the chart aloud without finding the number that matters.
3: Found the key number but gave only part of the so-what.
5: Pulled the right number quickly and said what it means for the case.

Synthesis

1: Summarized what was done, with no clear answer.
3: Gave an answer, but with weak reasons or no next step.
5: Answer first, then two or three reasons with numbers, the main risk, and next steps.

Communication

1: Hard to follow: long silences, no signposting.
3: Clear most of the time, with some rambling.
5: Calm and concise, signposted each step, and checked in with the interviewer.

Total

0 out of 25

Score all five criteria to see the band and the feedback template.