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DCF Calculator

Calculate the intrinsic value of an investment using Discounted Cash Flow analysis. Sum projected future cash flows discounted back to present value at a chosen discount rate to make informed investment decisions.

By Christopher FloiedPublished Updated

Minimum: 0.1

Results

Intrinsic Value (DCF)

$1,792,207.79

PV of Terminal Value

$1,337,662.34

How to Use This Calculator

1

Enter your input values

Fill in all required input fields for the DCF Calculator. Follow the units and input format printed next to each field. Where a unit selector is available, choose the units that match your data.

2

Review your inputs

Double-check that all values are correct and match the units or format shown for each field. Incorrect units are the most common source of calculation errors and can produce results that are off by factors of 2, 10, or more.

3

Read the results

The DCF Calculator computes the output in your browser and displays the results, with units clearly labeled, as soon as they are ready — no data sent to a server.

4

Explore parameter sensitivity

Try adjusting individual input values to see how the output changes. This is a quick and effective way to develop intuition about how different parameters influence the result and to identify which inputs have the largest effect.

When to Use This Calculator

  • •Use the DCF Calculator when comparing financial options side-by-side — such as different loan terms or investment returns — to make more informed decisions.
  • •Use it to quickly estimate costs or returns before making purchasing, investment, or borrowing decisions.
  • •Use it for financial education and planning to understand how compound interest, fees, or tax affects the real value of money over time.
  • •Use it when building or reviewing a budget to verify that projections and calculations are mathematically correct.

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Perpetuity Calculator

Calculate the present value of a perpetuity, an infinite stream of equal cash flows paid at regular intervals. Useful for valuing preferred stock, endowments, and terminal values in DCF analysis.

Present Value Calculator

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About DCF Calculator

The Discounted Cash Flow calculator estimates the intrinsic value of an investment by projecting future cash flows and discounting them to their present value. DCF analysis is the cornerstone of corporate finance and equity valuation, used by investment bankers, private equity analysts, and individual investors to determine whether a stock, business, or project is overvalued or undervalued. The method works on the principle that a dollar received in the future is worth less than a dollar today due to the time value of money. By selecting an appropriate discount rate and modeling expected cash flows, you can arrive at a fair value estimate independent of market sentiment or comparable company multiples.

The Math Behind It

Discounted Cash Flow analysis is rooted in the time value of money principle formalized by Irving Fisher in the early twentieth century. The core formula sums each projected cash flow divided by one plus the discount rate raised to the power of the year: DCF equals the sum of CF at time t divided by (1 + r) to the power t, for each year in the projection period. The discount rate typically reflects the weighted average cost of capital (WACC) for a firm or the investor's required rate of return. Beyond the explicit projection period, a terminal value captures the ongoing value of the business in perpetuity, usually calculated using the Gordon Growth Model: Terminal Value equals the final year cash flow times (1 + g) divided by (r - g), where g is the long-term sustainable growth rate. The terminal value often accounts for sixty to eighty percent of total DCF value, making growth rate assumptions critically important. Key assumptions include revenue growth rates, operating margins, capital expenditures, working capital changes, and the discount rate itself. Small changes in the discount rate or terminal growth rate can dramatically shift the valuation, which is why sensitivity analysis is essential. DCF works best for companies with predictable, positive cash flows and becomes less reliable for early-stage startups or highly cyclical businesses where projections are uncertain.

Formula Reference

DCF Formula

DCF = Σ CFₜ / (1 + r)^t + Terminal Value / (1 + r)^n

Variables: CFₜ = cash flow in year t; r = discount rate; n = projection years

Terminal Value (Gordon Growth)

TV = CFₙ × (1 + g) / (r - g)

Variables: CFₙ = final year cash flow; g = perpetual growth rate; r = discount rate

Worked Examples

Example 1: Small business valuation

A business generates $100K, $110K, $121K, $133.1K, $146.4K over 5 years. Discount rate is 10%, terminal growth is 3%.

Step 1:PV of year 1: 100000 / 1.10 = $90,909.
Step 2:PV of year 2: 110000 / 1.21 = $90,909.
Step 3:PV of year 3: 121000 / 1.331 = $90,909.
Step 4:PV of year 4: 133100 / 1.4641 = $90,909.
Step 5:PV of year 5: 146410 / 1.61051 = $90,909.
Step 6:Terminal value: 146410 * 1.03 / (0.10 - 0.03) = $2,154,319.
Step 7:PV of terminal value: 2154319 / 1.61051 = $1,337,662.
Step 8:Total DCF = 5 * 90909.09 + 1337662 = $1,792,208.

The intrinsic value of the business is approximately $1,792,208.

Example 2: Stock valuation with growing free cash flow

A company produces $50M free cash flow growing at 8% per year. Discount rate 12%, terminal growth 2.5%.

Step 1:Year 1 CF: $54M, Year 2: $58.3M, Year 3: $63M, Year 4: $68M, Year 5: $73.5M.
Step 2:Discount each at 12% and sum the present values: $224.5M.
Step 3:Terminal value: 73.47M * 1.025 / (0.12 - 0.025) = $792.7M.
Step 4:PV of terminal value: 792.7M / 1.7623 = $449.8M.

The enterprise value is approximately $674M ($224.5M + $449.8M) based on DCF analysis.

Common Mistakes & Tips

  • !Using an unrealistically high terminal growth rate that exceeds long-term GDP growth, which inflates the valuation enormously.
  • !Confusing free cash flow with net income or EBITDA, which can significantly overstate or understate available cash.
  • !Failing to perform sensitivity analysis on the discount rate and growth assumptions to understand the range of possible values.
  • !Ignoring working capital changes and capital expenditures when projecting free cash flows from revenue forecasts.

Related Concepts

Present Value

The foundational concept behind DCF, calculating what a future sum is worth today.

WACC

Weighted average cost of capital, commonly used as the discount rate in DCF analysis.

Perpetuity

A stream of infinite cash flows, used in the terminal value calculation of DCF.

Used in These Calculators

Calculators that build on or apply the concepts from this page:

Internal Rate of Return (IRR) Calculator

Net Present Value (NPV) Calculator

Perpetuity Calculator

WACC Calculator (Weighted Average Cost of Capital)

Frequently Asked Questions

What discount rate should I use for DCF analysis?

For corporate valuations, use the weighted average cost of capital (WACC), typically between 8% and 12% for established companies. For personal investments, use your required rate of return. Higher risk warrants a higher discount rate.

Why does the terminal value dominate the DCF result?

The terminal value captures all cash flows beyond the explicit projection period into perpetuity. For a company expected to operate indefinitely, this perpetual stream of cash flows naturally exceeds the five to ten years of explicitly projected cash flows.

Can DCF be used for startups with negative cash flows?

Yes, but it requires careful modeling. Include the negative cash flow years in the projection and estimate when the company will become cash-flow positive. The uncertainty makes the result less reliable, so wider sensitivity ranges are appropriate.

How does DCF differ from using P/E multiples?

DCF is an absolute valuation method based on fundamentals, while P/E multiples are relative valuation based on how similar companies are priced. DCF is more rigorous but requires more assumptions. Analysts typically use both methods and compare results.

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