You are working with a colleague who says he has completed a…
You are working with a colleague who says he has completed a DCF model for CoreWeave. He tells you he has made the following assumptions: Valuation date of December 31, 2025 (in other words the explicit forecast period runs from 2026E through 2030E) Cost of equity = 9.5% Cost of debt = 5.2% WACC = 10.3% Terminal growth rate assumption: 8% Annual revenue growth rate during the explicit forecast period is 2% Marginal tax rate = 22.1% All cash and marketable securities are considered excess cash (for bridging from EV to implied share price) Capex / depreciation (the replenishment ratio) grows from 4.3x for 2025A to 6.0x in 2030E OWC as % of sales increases throughout the explicit forecast The company starts paying dividends in 2027E and that reduces the unlevered free cash flows Related to the list of assumptions above, name four things that are either wrong and/or unreasonable. Provide an explanation for each as to why it is wrong and/or unreasonable.