Positive DCF value does not finance negative interim cash flows

Reconstruct the transition from native operating inputs

The synthetic 2027–2031 model has revenue and EBITDA EURk 100 each year, zero cash tax, D&A and operating NWC, and capex 130 / 110 / 90 / 70 / 50. Consequently FCFF is −30 / −10 / 10 / 30 / 50. Negative first-year FCFF is driven by investment, not negative EBITDA.

Opening cash and debt are zero; automatic financing and available commitment are zero. The DCF uses valuation date 2026-12-31, year-end timing, WACC 10% and perpetual growth 2%. The current engine’s exclusive period-end dates give times 1.002739726 to 5.002739726 years, which the reconciliation preserves.

Keep terminal value separate from the explicit forecast

Terminal FCFF is 50 × 1.02 = EURk 51. Undiscounted terminal value is 51 / (10% − 2%) = EURk 637.5. Discount that terminal value at the native final time and add the individual discounted FCFFs. The result is the Enterprise Value in the table, with no cash/debt bridge adjustment in this zero-opening-debt case.

A valid perpetual-growth denominator requires WACC above growth. A positive terminal FCFF also needs a defensible sustainable operating and reinvestment basis. The arithmetic does not establish that the assumed transition will occur.

Stress early cash burn and read terminal dependence

Raise the first two capex amounts to 160 and 140, leaving all other assumptions unchanged. FCFF becomes −60 / −40 / 10 / 30 / 50. Explicit-period PV is now negative while total EV remains positive. Terminal PV therefore exceeds 100% of EV in this stress case; it does not do so in Base.

As a separate terminal check on Base, lowering perpetual growth to 1% at the same WACC and date gives native EV EURk 371.821. This changes terminal economics, unlike the early-capex stress, which leaves terminal value unchanged.

Download the synthetic example, explicitly import it under Model, select Advanced and open Value → DCF. Import creates a separate model with inspectable inputs and sources.

Review whether the transition can be funded

With no external financing, Base reaches a EURk 40 cash deficit after year two; stress reaches EURk 100. A positive DCF is a discounted value calculation, not cash available to pay those bills. Negative cash is a visible funding shortfall, not an assumed authorized overdraft.

Use the financing schedule to specify actual sources, access conditions, rates and dates. If survival depends on funding that is unavailable, a going-concern DCF alone is incomplete. This example supplies no distress probability, credit approval or investment recommendation.

Additional reconciled variants

These native files reproduce the discussed variants separately: Base with 1% terminal growth.

Related decisions and model reference

For adjacent questions: DCF Valuation Model; Free Cash Flow to the Firm: FCFF Calculation for DCF; Terminal Value Normalization: Rebuild Sustainable FCFF; Cross-Check a DCF Terminal Value: Implied Multiple and Growth.

For the exact controls and source behavior, use DCF workflow and outputs and Terminal methods and cross-checks.