DCF Calculator
Estimate a modeled operating value from discounted free cash flow assumptions.
For educational purposes only. This calculator does not provide investment advice.
Present Value of FCF
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Terminal Value (PV)
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Modeled Operating Value/Share
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📊 Visual Analysis
What This Calculator Does
The DCF Calculator produces a scenario-based operating value from projected free cash flows, a discount rate, and a terminal multiple. Because this simplified version does not adjust for net debt, excess cash, non-operating assets, options, or other claims, its per-share output is not a complete equity value or a buy/sell signal.
Formula
Present Value = FCF / (1 + r)^n
Where FCF is future cash flow, r is discount rate, and n is the number of years in the future.
The terminal value is also discounted back to present value: PV(Terminal) = Terminal / (1 + r)n
PV(Terminal) = Terminal / (1 + r)^n
Input Fields Explained
Free Cash Flow ($ millions)
Enter a consistently defined cash-flow measure. If using enterprise free cash flow available to debt and equity holders, pair it with an enterprise discount rate such as WACC. If using equity cash flow, pair it with a cost of equity. Do not mix cash-flow and discount-rate definitions.
Growth Rate (%)
Expected annual growth rate of free cash flow during the projection period. Use your own reasoned estimate — sustained high growth is rare. The appropriate rate depends on the company's stage, industry, and competitive position.
Projection Period (years)
How many years to project cash flows. Longer projections are more uncertain. 5-10 years is common; beyond 15 years becomes highly speculative.
Discount Rate (%)
Use a rate consistent with the cash-flow definition, currency, horizon, inflation basis, capital structure, and risk assumptions. Enterprise free cash flow is commonly paired with WACC; equity cash flow is commonly paired with a cost of equity. A lower or higher rate changes the modeled present value but does not by itself prove that either estimate is correct.
Terminal Value Multiple
The multiple of final-year FCF used to calculate terminal value. Choose a multiple that reflects the company's growth and quality characteristics. Alternatively, use perpetual growth rate (g) with formula: TV = Final FCF × (1 + g) / (r - g).
Shares Outstanding (millions)
Enter a diluted share count consistent with the valuation date. In this simplified calculator it divides modeled operating value, not a fully reconciled equity value; net debt, excess cash, non-operating assets, options, and other claims still require separate adjustment.
Example Calculation
Company with $100M FCF, 5% growth for 10 years, 10% discount rate, 15x terminal multiple, 100M shares.
Year 1 FCF = $100M × 1.05 = $105M → PV = 105 / 1.10 = $95.5M
Year 10 FCF = $100M × 1.0510 = $162.9M → PV = 162.9 / 1.1010 = $62.8M
Terminal Value = 15 × $162.9M = $2,444M → PV = 2,444 / 1.1010 = $942M
Modeled Operating Value = Sum of PV FCF ($781.2M) + PV Terminal ($942.0M) = $1,723.2M
Modeled Operating Value per Share = $1,723.2M / 100M shares = $17.23/share
The $17.23 output is not yet a complete equity value. Before comparing it with market price, reconcile net debt, excess cash, non-operating assets, dilution, and other claims, and test a range of growth, discount-rate, and terminal assumptions.
How to Read the Result
The sum of all projected cash flows discounted to present value. This is the value of the company's operations during the projection period.
The discounted value of the company beyond the projection period. Terminal value often represents a large portion of total value.
The modeled operating value divided by the selected share count. It is not a complete equity value until net debt, cash, non-operating assets, dilution, and other claims are reconciled.
Common Mistakes
- Using an unsupported growth path. A high growth assumption can dominate the output, especially when combined with a high terminal multiple. Test whether margins, reinvestment, market size, and competitive conditions can support the projected path.
- Using an inconsistent discount rate. A lower rate increases modeled present value and a higher rate decreases it. The relevant question is whether the rate matches the cash-flow definition, currency, horizon, inflation basis, leverage, and risk assumptions.
- Assuming growth will continue forever. Most companies eventually mature and growth slows toward broader economic rates. Assuming high perpetual growth overstates value.
- Ignoring sensitivity to inputs. DCF results change dramatically with small changes to growth rate or discount rate. Always run scenario analysis with different assumptions.
- Taking the result literally. DCF produces an estimate based on assumptions. The intrinsic value is not a precise target price; it's a model output that should be one input among many.
When This Calculator Is Useful
- Estimating the fair value of a mature, stable company with predictable cash flows
- Understanding what market expectations are implied by current stock prices (reverse DCF)
- Comparing valuations across companies using consistent assumptions
- Evaluating how changes in growth expectations would affect stock value
Limitations
- DCF assumes constant growth rates, which rarely reflects reality
- Results are extremely sensitive to discount rate and growth rate assumptions
- Not suitable for companies with negative or highly volatile cash flows
- Does not account for changes in capital structure (debt/equity mix) over time
- Terminal value often dominates the result and is the most uncertain component
- For educational purposes only — results do not constitute financial advice or a recommendation to buy or sell any security
Frequently Asked Questions
What is DCF?
DCF discounts a defined stream of forecast cash flows to a present-value estimate. The cash-flow definition must match the discount rate: enterprise free cash flow is commonly paired with WACC, while equity cash flow is commonly paired with a cost of equity. The result is assumption-dependent and is not directly observable.
What is a good discount rate?
There is no single correct discount rate. It must be consistent with the modeled cash flows, currency, horizon, inflation basis, capital structure, and risk assumptions. Enterprise free cash flow is commonly discounted at WACC; equity cash flow is commonly discounted at a cost of equity. A personal return threshold is not automatically interchangeable with either rate.
What is terminal value?
Terminal value captures the value of the company beyond the projection period. It's often calculated as a multiple of the final year's cash flow (e.g., 15x FCF) or using a perpetual growth model. Terminal value often represents a large portion of total DCF value.
What if the calculated intrinsic value is below current price?
This simplified calculator produces a modeled operating value per share, not a complete equity value. Comparing it with market price is incomplete until you reconcile net debt, excess cash, non-operating assets, dilution, and other claims. Use multiple scenarios and do not treat one output as a buy or sell signal.
How sensitive is DCF to the terminal value assumption?
Terminal value often accounts for a large portion of the total DCF valuation, making it the most impactful assumption in the model. Small changes in the terminal growth rate or discount rate can swing the valuation significantly. Always run sensitivity analysis by varying these assumptions to understand the range of possible valuations rather than relying on a single point estimate.
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Educational Disclaimer
This calculator is for educational and informational purposes only. It does not provide investment, financial, tax, or legal advice. The results are based on the inputs and assumptions you provide and may not reflect real market conditions, fees, taxes, or risks. Always do your own research or consult a qualified professional before making financial decisions.