I’m not writing this because I crushed every corporate finance assignment. I’m writing this because I didn’t. I’ve handed in reports with broken models, cited Investopedia like it was a research paper, and yes - I’ve once confused WACC with ROI.
So here’s a list of the mistakes I personally wish I’d avoided sooner, with a few real-world wake-up calls included.
- Using the Wrong Discount Rate Like It’s No Big Deal
Seriously, if you’re just dropping in “10%” for the discount rate without context - don’t.
You can’t just slap a rate on NPV/DCF and call it a day. It needs to reflect the cost of capital for that project - industry, risk profile, country risk premium, etc.
Tip: For a US-based tech company, 10% might be generous. For a Brazilian mining firm? 17% could be too low.
Use:
- CAPM for equity
- Weighted Average Cost of Capital (WACC) for overall firm/project valuation
Yes, calculate them. Don’t assume them.
- Forgetting to Link the Income Statement, Balance Sheet, and Cash Flow Statement
This is the classic “they don’t talk to each other” mistake.
You make a profit in Year 1 but cash goes negative. Why? Because you forgot capital expenditures in your cash flow, or your debt repayments magically disappeared.
If you’re building a model in Excel (or Google Sheets), link everything.
- Net income flows into retained earnings
- Depreciation is a non-cash item that adds back into operating cash flow
- CapEx hits the investing section but affects PP&E on the balance sheet
Pro move: Build the three statements in layers - income, cash, then balance - and tie them tightly.
- Treating Excel Like a Notepad
Don't just dump numbers into cells.
If I open your file and see =4000*1.083 randomly in cell E15, we’re gonna have a problem.
Use:
- Named ranges
- Separate input sheets (change a single cell, model updates automatically)
- Clearly labeled assumptions (with units!)
And always - I mean always - color-code:
Blue = inputs
Black = formulas
Green = links
Make your future self (or your professor) not want to throw your file out the window.
- Ignoring Real-World Assumptions
I once modeled a retail store expansion and forgot to include rent. R E N T.
Yes, my projections showed they’d grow at 12% annually. But where exactly were they operating? The sidewalk?
Don’t forget:
- Operational costs (utilities, salaries, storage, etc.)
- Taxes (real ones, not “pretend 20%” unless you specify it’s effective)
- Time to ramp up (not all revenues start at 100% in Month 1)
Use actual data from:
Annual reports (10-Ks are gold)
Industry benchmarks (PwC, Deloitte, IBISWorld)
Cost estimation tools like Statista or OECD stats
Overcomplicating When You Don’t Understand the Basics
Building a Monte Carlo simulation to estimate IRR variance doesn’t help if you don’t know how IRR works.
Professors can tell when you’re hiding behind formulas to make up for weak understanding. Don’t bury your logic under 18 tabs of noise.
Keep it simple:
- Clear assumptions
- Step-by-step outputs
- Explain why each decision matters (like: “We chose straight-line depreciation for clarity and consistency with peer benchmarking.”)
Less flash, more clarity.
- Using Outdated Templates from Sketchy Forums
Red flag: Anything that starts with “Corporate_Finance_Model_FINALv3_revised.xls”
Most of those spreadsheet templates circulating in group chats and Reddit threads are full of:
- Broken links
- Old tax codes
- Hidden sheets with formulas that don’t match
Build your own. Even if it sucks at first.
You’ll learn 100x more making a clunky three-statement model from scratch than copying a perfect one you can’t explain.
- Underestimating the Power of Sensitivity Analysis
A single change in your cost of capital or revenue growth % can turn your “great idea” into a flaming financial train wreck.
But most students don’t touch this section. Why?
Because it looks like more work. (It is. But it’s worth it.)
Run scenarios:
- Best case (everything goes right)
- Base case (realistic forecast)
- Worst case (your CEO eats glue and inflation hits 15%)
Even better, show a tornado diagram. Looks great, adds depth, gets points.
- Bad or No Citations for Financial Sources
Google isn't a source. Neither is “some site I found.”
If you're using data from McKinsey, cite the report name. If you pulled cost assumptions from Tesla’s 10-K, link it. Use proper formats - APA, MLA, whatever your prof wants.
Bonus: It shows you did real research, not back-of-the-napkin guessing.
- Not Stress-Testing the Model
Before you submit, try breaking your own model.
- Increase CapEx to $100M. Does the model crash?
- Set revenue growth to 0%. What happens to profit?
- Mistype one number. Do the rest update?
If you can’t stress it, you haven’t tested it.
Excel Tip: Press Ctrl + [`] to see all formulas. Then scroll and scan for weird stuff.
- Writing the Report Like a Diary, Not a Decision Document
Your assignment isn’t a place to say “Then I calculated NPV. Then I looked at IRR.”
Write it like a financial analyst writing to a decision-maker. Your professor = the CEO.
Structure:
- Executive Summary (1/2 page max)
- Key Assumptions
- Valuation/Analysis
- Recommendation
- Risks + Mitigations
Talk results. Talk value. Talk business.
