Skip to content
Businessvaluation

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.

$
%
%
%
$
Enterprise value
$197,142,857.14

$197,142,857.14, of which 74.64% is the terminal value. That concentration is the point to argue about: the forecast years contribute $50,000,000.00 and everything after them contributes $147,142,857.14.

Present value of the forecast years
$50,000,000.00
Terminal value at the horizon
$236,975,042.86
Terminal value, discounted
$147,142,857.14
Terminal share of the total
74.64%
Equity value after net debt
$197,142,857.14
Value per share
$0.00
How this is calculated

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 values
$0.00$12.5 million$25 million$37.5 million$50 millionYear 1Year 5
Cumulative present value

Forecast years

YearFree cashflowDiscount factorPresent value
1$11,000,0000.91$10,000,000
2$12,100,0000.83$10,000,000
3$13,310,0000.75$10,000,000
4$14,641,0000.68$10,000,000
5$16,105,1000.62$10,000,000
Method and background

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)

Worked examples

Each of these is asserted on every build. If a change to the engine ever moved one of these answers, the build would fail before the page could print it.

a five-year forecast at ten percent

Free cashflow this year
$100.00
Growth rate during the forecast
10%
Forecast years
5
Terminal growth rate
3%
Discount rate (WACC)
10%
Net debt
$0.00
Shares outstanding
0

Enterprise value$1,971.43

Growth equal to the discount rate makes each discounted year exactly the starting cashflow, so five years is 500

Open this example

net debt reduces equity value one for one

Free cashflow this year
$100.00
Growth rate during the forecast
10%
Forecast years
5
Terminal growth rate
3%
Discount rate (WACC)
10%
Net debt
$1,000.00
Shares outstanding
100

Enterprise value$1,971.43

arithmetic identity against the enterprise value in the first case

Open this example

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 · United States · 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.