DCF Valuation Calculator
Estimate an illustrative discounted cash flow valuation using starting free cash flow, annual growth, discount rate, forecast period, and terminal growth assumptions.
Estimate discounted cash flow value
Enter annual free cash flow and assumptions. The calculator discounts forecast cash flows and a terminal value to estimate an illustrative enterprise value.
DCF estimates are highly sensitive to assumptions and are not a target price or investment recommendation. Terminal growth must be lower than the discount rate.
How a discounted cash flow valuation works
Discounted cash flow (DCF) analysis estimates the present value of future free cash flows. Each forecast cash flow is discounted using a rate intended to reflect time value and risk. A terminal value estimates cash flows beyond the explicit forecast period, using a perpetual growth assumption in this simplified model.
The model adds the present value of forecast cash flows and terminal value to estimate enterprise value. It then adds the net cash amount you enter to produce an illustrative equity-value estimate. It does not calculate value per share because share count is not provided. Analysts often use a range of scenarios rather than relying on a single estimate.
Assumptions that can change the valuation
- Free cash flow: start with a consistent measure and period, usually annual cash flow available to capital providers.
- Growth rate: reflects an assumption about future cash-flow growth, not a guaranteed outcome.
- Discount rate: a higher rate lowers present value because future cash flows are discounted more heavily.
- Terminal growth: should be a conservative long-run assumption and remain below the discount rate.
Small changes in the discount rate or terminal growth can materially change the result, particularly because terminal value often represents a large share of estimated value. Compare conservative, base, and optimistic scenarios and review the business's competitive position, capital expenditure needs, working capital, and cyclicality. This simplified calculator assumes a constant annual growth rate during the explicit forecast and a perpetual-growth terminal model; it does not validate financial statements or determine the appropriate assumptions for a specific company.
Frequently asked questions
What is the discount rate?
It is the rate used to translate future cash flows into present value. The appropriate rate depends on the business, cash-flow risk, capital structure, and valuation method.
Why is terminal growth below the discount rate?
In the perpetual-growth formula, the denominator is the discount rate minus terminal growth. If terminal growth equals or exceeds the discount rate, the formula is not economically usable in this model.