📊 Discounted Cash Flow (DCF) Calculator
Calculate the intrinsic fair value of a company or stock using a 5-year Discounted Cash Flow (DCF) model with terminal value and WACC discount rate.
5-Year Discounted Cash Flow Projections
| Year | Projected Free Cash Flow | Present Value (PV) |
|---|---|---|
| Year 1 | $100,000 | $90,909 |
| Year 2 | $108,000 | $89,256 |
| Year 3 | $116,640 | $87,633 |
| Year 4 | $125,971 | $86,040 |
| Year 5 | $136,049 | $84,476 |
What Discounted Cash Flow (DCF) Calculator Does
A discounted cash flow model values a business as the present value of the cash it will produce. This calculator projects five years of free cash flow from a starting figure and a growth rate, discounts each year at your cost of capital, adds a Gordon-growth terminal value for everything after year five, and then bridges from enterprise value to a per-share figure.
That bridge is the step simple DCF tools skip. Free cash flow discounted at the weighted average cost of capital is the cash available to everyone who funded the business — lenders as well as shareholders — so what the model produces is enterprise value. Dividing it straight by the share count hands the debt holders' share to the equity. Equity value is enterprise value minus net debt, and only that figure divides by shares. This calculator used to make exactly that mistake; it now takes a net debt input and shows the subtraction.
The second thing worth knowing before you trust any output: most of the answer is not the five years you carefully projected. On the default inputs, 72.5% of the total value is the terminal value — the single assumption about what happens after the forecast ends. A DCF looks like a detailed forecast and behaves like a bet on one number.
How to Use Discounted Cash Flow (DCF) Calculator
- Enter Year 1 Free Cash Flow and expected 5-year growth rate
- Input your required discount rate (WACC %) and terminal growth rate
- Optionally enter total shares outstanding to compute fair value per share
- Review the 5-year cash flow table and total enterprise intrinsic valuation
Formula Used by Discounted Cash Flow (DCF) Calculator
Present value of the projected cash flows
PV = Σ CF₁(1 + g)^(t−1) ÷ (1 + r)^t for t = 1…5
- CF₁
- Free cash flow in year 1 — the starting point, not last year's figure
- g
- Annual growth rate applied to years 2 through 5
- r
- Discount rate, the weighted average cost of capital (WACC)
- t
- Year number, 1 through 5; each year is discounted by one more power of (1 + r)
Worked example
The defaults: $100,000 year-1 free cash flow, growing 8% a year, discounted at 10%.
- Year 1: 100,000 ÷ 1.10 = 90,909
- Year 2: 108,000 ÷ 1.10² = 89,256
- Year 3: 116,640 ÷ 1.10³ = 87,633
- Year 4: 125,971 ÷ 1.10⁴ = 86,040
- Year 5: 136,049 ÷ 1.10⁵ = 84,476
Result: $438,314 for the whole five-year forecast. Note how little the discounting lets the growth show: cash flow rises 36% over the period while its present value falls, because 10% discounting outruns 8% growth.
Terminal value (Gordon growth), and its present value
TV = CF₅ × (1 + tg) ÷ (r − tg); PV(TV) = TV ÷ (1 + r)⁵
- CF₅
- Free cash flow in the final projected year
- tg
- Terminal growth rate — the rate assumed to continue forever
- r − tg
- The spread that does all the work. As it narrows toward zero the terminal value explodes
Worked example
CF₅ = $136,049, terminal growth 2.5%, discount rate 10%.
- TV = 136,049 × 1.025 ÷ (0.10 − 0.025)
- TV = 139,450 ÷ 0.075 = 1,859,335
- PV(TV) = 1,859,335 ÷ 1.10⁵ = 1,154,501
Result: $1,154,501 — which is 72.5% of the $1,592,815 total. The five years of explicit forecasting contribute the other 27.5%.
Enterprise value to value per share
Equity value = Enterprise value − Net debt; Per share = Equity value ÷ Shares outstanding
- Net debt
- Total interest-bearing debt minus cash and equivalents. Negative when a company holds more cash than debt
- Enterprise value
- PV of the forecast plus PV of the terminal value — the value of the operating business to all capital providers
Worked example
Enterprise value $1,592,815 and 50,000 shares, tested at four different capital structures.
- No debt: 1,592,815 ÷ 50,000 = $31.86
- Net debt $200,000: (1,592,815 − 200,000) ÷ 50,000 = $27.86
- Net debt $500,000: (1,592,815 − 500,000) ÷ 50,000 = $21.86
- Net cash $100,000 (net debt −100,000): (1,592,815 + 100,000) ÷ 50,000 = $33.86
Result: The same business is worth $21.86 or $33.86 a share depending entirely on the balance sheet. Skipping this step overstates a leveraged company by exactly the debt per share — $10.00 in the $500,000 case, 31% of the answer.
Enterprise Value Across the Two Assumptions That Matter
Year-1 free cash flow $100,000 growing 8%. Every cell is a complete DCF. The grid moves the discount rate down the side and terminal growth across the top — both plausible ranges, no extreme values.
| WACC | tg 1.5% | tg 2.0% | tg 2.5% | tg 3.0% | tg 3.5% |
|---|---|---|---|---|---|
| 8% | $1,909k | $2,037k | $2,189k | $2,370k | $2,593k |
| 9% | $1,647k | $1,739k | $1,845k | $1,968k | $2,114k |
| 10% | $1,447k | $1,515k | $1,593k | $1,681k | $1,783k |
| 11% | $1,289k | $1,342k | $1,400k | $1,466k | $1,541k |
| 12% | $1,162k | $1,203k | $1,249k | $1,299k | $1,356k |
How Much of the Answer Is Terminal Value?
Share of total enterprise value contributed by the terminal value, for the same $100,000 growing at 8%. It never drops below 60%.
| WACC | tg 0% | tg 2.5% | tg 3.5% |
|---|---|---|---|
| 8% | 71.4% | 78.8% | 82.1% |
| 10% | 65.8% | 72.5% | 75.4% |
| 12% | 60.7% | 66.7% | 69.3% |
Terminal Growth Approaching the Discount Rate
WACC fixed at 10%. This is the failure mode every valuation text warns about, with numbers on it. The model does not break gradually — it goes vertical.
| Terminal growth | Enterprise value | Multiple of the 2.5% case |
|---|---|---|
| 2.5% | $1.59M | 1.0× |
| 5.0% | $2.21M | 1.4× |
| 8.0% | $5.00M | 3.1× |
| 9.0% | $9.65M | 6.1× |
| 9.5% | $18.94M | 11.9× |
| 9.9% | $93.28M | 58.6× |
The Five-Year Forecast on the Default Inputs
Each year grown 8% from the previous and discounted at 10%. This is the table the calculator prints.
| Year | Projected free cash flow | Present value | Discount factor |
|---|---|---|---|
| 1 | $100,000 | $90,909 | 0.9091 |
| 2 | $108,000 | $89,256 | 0.8264 |
| 3 | $116,640 | $87,633 | 0.7513 |
| 4 | $125,971 | $86,040 | 0.6830 |
| 5 | $136,049 | $84,476 | 0.6209 |
How to Read Your Result
Terminal growth cannot exceed long-run economic growth
A company growing forever at a rate above the economy eventually becomes the economy, and then larger than it. That is why terminal growth is conventionally held at or below long-run nominal GDP growth — in practice somewhere around 2% to 3% for a US business, and often set to zero as a deliberate margin of safety. The table above shows why the discipline matters: at 9.9% terminal growth against a 10% discount rate the model returns $93.28M for a business generating $136,049 of cash in year five. The arithmetic is not wrong. The assumption is absurd, and the model will not tell you so.
The forecast you spent the effort on is the minority of the answer
Between 60% and 82% of enterprise value in the tables above comes from the terminal value. Refining the five-year projection — arguing about whether growth is 7% or 9% — moves a quarter of the result. Changing the discount rate by one percentage point, or terminal growth by half of one, moves far more. If you want to know how confident to be in a DCF, do not re-forecast; widen the two assumptions and look at the range, which is what the grid above is for.
What the discount rate is supposed to be
WACC is the blended cost of the money funding the business — the return lenders require and the return equity holders require, weighted by how much of each there is. It is not a target return, not a hurdle rate you would like to beat, and not the same for every company. A higher rate means a riskier business, which mechanically lowers its value. Because this calculator takes WACC as an input rather than building it from a risk-free rate, a beta and a cost of debt, the quality of the output depends entirely on a number you supplied from somewhere else.
A valuation is a range, not a price
Every cell in the sensitivity grid is a legitimate DCF built from defensible inputs, and they span $1.16M to $2.59M — a factor of 2.2. The honest output of this exercise is that range, together with where in it your own assumptions sit. Investors who use DCF seriously apply a margin of safety to the low end rather than acting on the point estimate, precisely because the point estimate carries a precision the method does not have.
Limitations & Accuracy Notes
- Fixed five-year forecast horizon with a single growth rate applied to all of years 2 to 5. There is no per-year cash flow entry, no multi-stage growth fade, and no way to extend or shorten the explicit forecast.
- No ticker lookup. Competing tools auto-fill financials from a market data feed; this one needs free cash flow, share count and net debt entered by hand from the filings.
- Takes WACC as an input rather than computing it. There is no risk-free rate, beta, equity risk premium or cost of debt build-up.
- Gordon growth terminal value only. There is no exit-multiple terminal value, which is the other standard approach and often gives a materially different answer on the same forecast.
- End-of-year discounting. Cash actually arrives through the year, and the mid-year convention that adjusts for this would raise every valuation here by roughly half a year of discounting.
- No reverse DCF. It cannot solve for the growth rate implied by a market price, which is the more useful direction when a stock already trades.
- Free cash flow is taken as given. Deriving it correctly from the statements — operating cash flow less capital expenditure, with working-capital and stock-based-compensation treatment decided — is the hardest part of a real DCF and happens before this calculator.
- Returns a point estimate from point inputs. Use the sensitivity grid above rather than treating the single figure as a valuation.
Frequently Asked Questions
What is a Discounted Cash Flow (DCF) valuation?
What is Terminal Value in DCF modeling?
What is a discounted cash flow valuation?
Why is the discount rate so important?
What is terminal value and why does it dominate?
How far ahead should I forecast?
Is a DCF a precise valuation?
Is this investment advice?
References & Further Reading
- Aswath Damodaran, NYU Stern — Valuation resources — The standard academic reference for DCF practice, including terminal value estimation and the constraint that stable growth cannot exceed the growth rate of the economy
- U.S. Department of the Treasury — Daily Treasury Par Yield Curve Rates — The risk-free rate that anchors a cost of capital, and a practical ceiling to sanity-check a perpetual growth assumption against