DCF Valuation Calculator
A two-stage discounted cashflow valuation, with the terminal share shown as a percentage. That percentage is usually most of the answer, which is the honest thing to know about the method.
Also called: discounted cash flow calculator, intrinsic value calculator.
₹19,71,42,857, of which 74.64% is the terminal value. That concentration is the point to argue about: the forecast years contribute ₹5,00,00,000 and everything after them contributes ₹14,71,42,857.
An estimate, not an offer or a guarantee. Projected returns assume the rate you entered holds for the whole term, which no market does.
Value accumulating
Hover or drag for valuesForecast years
| Year | Free cashflow | Discount factor | Present value |
|---|---|---|---|
| 1 | ₹1,10,00,000 | 0.91 | ₹1,00,00,000 |
| 2 | ₹1,21,00,000 | 0.83 | ₹1,00,00,000 |
| 3 | ₹1,33,10,000 | 0.75 | ₹1,00,00,000 |
| 4 | ₹1,46,41,000 | 0.68 | ₹1,00,00,000 |
| 5 | ₹1,61,05,100 | 0.62 | ₹1,00,00,000 |
How this is calculated
Cashflows are grown at the forecast rate and discounted back, then everything beyond the horizon is collapsed into a terminal value using a perpetuity that grows forever at the terminal rate. The terminal value is normally two thirds or more of the total, so a valuation is far more sensitive to the two rates than to any of the forecast detail. Terminal growth must be below the discount rate or the perpetuity is infinite, and it should not exceed long-run economic growth, because a company growing faster than the economy forever eventually becomes the economy.
enterprise value = discounted forecast cashflows + terminal value discounted back- FCF_t
- Free cashflow in year t (currency)
- r
- Discount rate (decimal)
- g
- Terminal growth rate (decimal)
- n
- Forecast years (years)
Method and limits
What it assumes
- Free cashflow is already after tax and after the capital spending needed to sustain growth.
- One discount rate for the whole horizon.
What it deliberately does not model
- The terminal value dominates, so the output is an argument about two assumptions dressed as a calculation.
- It does not model changing margins, working capital swings or dilution.
Formula version 1.0.0 · definition 1.0.0 · India · Report a problem with this calculator
Frequently asked questions
- Why is the terminal value most of the answer?
- Because a going concern is assumed to last far longer than the forecast. That is not a flaw in the arithmetic, but it does mean the valuation rests on the terminal assumptions rather than on the detailed years.
- What if terminal growth is above the discount rate?
- The formula breaks: the perpetuity becomes infinite. This declines rather than printing a nonsense number, which is the correct behaviour and a check that the assumptions are coherent.