---
title: What are your model assumptions?
description: Generally, our estimates aim to provide the most reasonable extrapolation of historical results possible. We are not in the business of making wild forecasts for the future.
---

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# What are your model assumptions?

## Generally, our estimates aim to provide the most reasonable extrapolation of historical results possible. We are not in the business of making wild forecasts for the future.

This [white paper](https://www.newconstructs.com/education-close-the-loopholes-how-our-dcf-works/) provides more details on our DCF model and the default forecasts. This [page](https://www.newconstructs.com/models/) provides a deep dive into all of our model functions. 

1.  Generally, our estimates aim to provide the most reasonable extrapolation of historical results possible. We are not in the business of making wild forecasts for the future. Quite the opposite, we focus on quantifying what the market’s expectations are for the future.
2. Revenue forecasts: consensus estimates where we can get them. In later years, we normalize down to long-term GDP growth or the highest the company has achieved in the past- whichever is lower.
3.  NOPBT (Pre-tax) Margins: extrapolate historical margins
4. Cash tax rate: extrapolate past tax rate
5. Incremental working capital: extrapolate historical working capital needs
6. Incremental fixed capital: extrapolate historical fixed assets needs with a slight bias to assuming slightly more efficiency going forward
7. Overall, most of our forecasts assume a slight increase in ROIC over time. There are, of course, many exceptions to this rule given the wide differences in companies and historical performance.

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