DCF model means Rappaport model which was proposed by US. Northwestern University Professor Rappaport in 1986. It's to use DCF method to make sure the highest acceptable value of merge. Need to assess the expected incremental cash flow and discount rate after merge. The cash flow in the model means FCF,that is, deducting tax,operation capital,and net investment ,then you can get the final present value. If the strike price is higher the value, it's not a good deal and will induce loss.