Interactive Discounted Cashflow Valuation
Use Inferential Investor's iCoT technique to perform a detailed valuation modelling exercise on any company with AI's assistance.
Last updated: 19 October 2025
Objective:
Value any stock using DCF techniques within a pre-specified interactive framework. Assess and agree valuation assumptions, build forecasts collaboratively with AI over different horizons, calculate the valuation and a sensitivity matrix and receive insights on the implications of the valuation for the market’s assessment of the stock.
Explanation:
This valuation workflow turns DCF from a black box into a guided conversation. We progress step-by-step with explicit user confirmation, using ChatGPT’s Advanced Data Analysis mode to fetch, clean, and compute inputs. Each stage is anchored in first principles from published finance theory - capital structure, cost of capital, operating leverage, capital intensity and working capital mechanics, and translated into investor-ready tables. The process is deliberately interactive: AI proposes assumptions (WACC, growth, margins, CapEx intensity), you adjust them, and we instantly recompute. At every step, we log sources for auditability and mark anything “ND” when data can’t be verified, so you always know what’s fact, what’s estimate, and what needs a better input. Where inputs can’t be retrieved, alternative actions are recommended.
Where AI adds real lift is in synthesis and guardrails. Advanced Data Analysis handles the heavy lifting including pulling historicals, calculating derived metrics, and projecting cash flows, while the assistant overlays narrative insight: how management’s guidance lines up with the model, whether margin expansion is plausible given segment mix, and how growth affects free cash conversion.
The prompt also runs sensitivities across WACC and terminal growth scenarios to show what the market is implicitly pricing, then tees up optional modules to follow through with further analysis such as earnings-call sentiment, news scans, or peer comps to pressure-test the valuation. The result is a transparent, academically grounded DCF that’s able to be used by any investor, regardless of experience level, fast to iterate, easy to audit and adjust, and enriched by AI-driven context.
As always, be aware that models can make mistakes. At each step, examine the response and challenge information or conclusions that appear erroneous before proceeding to any subsequent steps. If in doubt use a second model with the same prompt to verify the information and generate challenge questions and answers (CoVe process) to correct interpretations of data.
Link to blog post explanation:
N/A
Preferred Model(s):
Best: ChatGPT-5 Plus with Advanced Data Analysis (PLUS subscription required). The prompt can be rub without ADA as well.
Important Execution Notes:
Insert the ticker, company name and exchange where indicated and press run. The prompt will guide you through step by step in using Inferential Investor’s iCoT Q&A framework.
Sample Output:
This sample output shows both AI and user interactions through the entire workflow to produce a DCF valuation for Microsoft.
Copy/Paste Prompt Set:
Important note: Subscribers can use this prompt set for their own analysis. However, the prompt is copyrighted by The Inferential Investor, paywalled, and must not be shared without permission.