A DCF says a business is worth the cash it will generate, discounted for time and risk. It is very sensitive to the growth and discount rates, so analysts test several scenarios rather than relying on one number.
How to use the Discounted Cash Flow Calculator
- Free cash flow to the firm (latest year)
- Growth rate during projection
- Projection years
- Perpetual growth rate
- WACC (discount rate)
- Cash and equivalents
- Outstanding debt
- Shares outstanding
- Current share price
Results update as you type, and every field accepts the units shown in its menu.
How it works
Enter the latest free cash flow to the firm, the growth rate for the projection years, the perpetual growth rate, WACC, cash, debt, shares and the current share price.
Inputs explained
| Field | What to enter |
|---|---|
| Free cash flow to the firm (latest year) | Amount in your currency |
| Growth rate during projection | In % |
| Projection years | A number |
| Perpetual growth rate | In % |
| WACC (discount rate) | In % |
| Cash and equivalents | Amount in your currency |
| Outstanding debt | Amount in your currency |
| Shares outstanding | A number |
| Current share price | Amount in your currency |
What each result means
- PV of projected cash flows = gpv([WACC (discount rate)]÷100, [Projection years], [Free cash flow to the firm (latest year)]×(1 + [Growth rate during projection]÷100), [Growth rate during projection]÷100, 0)
- PV of terminal value = [Free cash flow to the firm (latest year)]×(1 + [Growth rate during projection]÷100)^[Projection years]×(1 + [Perpetual growth rate]÷100)÷([WACC (discount rate)]÷100 – [Perpetual growth rate]÷100)÷(1 + [WACC (discount rate)]÷100)^[Projection years]
- Enterprise value = [PV of projected cash flows] + [PV of terminal value]
- Equity value = [Enterprise value] + [Cash and equivalents] – [Outstanding debt]
- Fair value per share = [Equity value]÷[Shares outstanding]
- Upside / downside vs price = ([Fair value per share]÷[Current share price] – 1)×100
Example values
How the main result changes when Free cash flow to the firm changes and everything else stays at the example values above:
| Free cash flow to the firm (latest year) | Fair value per share |
|---|---|
| 250,000,000 | 42.81 |
| 375,000,000 | 67.71 |
| 500,000,000 | 92.62 |
| 625,000,000 | 117.52 |
| 750,000,000 | 142.42 |
| 1,000,000,000 | 192.23 |
Formula
PV of FCFF = Σ FCFF × (1 + g)^t ÷ (1 + WACC)^t, t = 1..N
Terminal value = FCFF_N × (1 + g∞) ÷ (WACC − g∞), discounted N years
Equity value = enterprise value + cash − debt; value per share = equity ÷ shares
Worked example
Inputs: Free cash flow to the firm (latest year): $500,000,000; Growth rate during projection: 8 %; Projection years: 5; Perpetual growth rate: 2.5 %; WACC (discount rate): 9 %; Cash and equivalents: $800,000,000; Outstanding debt: $1,500,000,000; Shares outstanding: 100,000,000; Current share price: $85.
Results: PV of projected cash flows = $2,432,028,570.39; PV of terminal value = $7,529,511,497.91; Enterprise value = $9,961,540,068.30; Equity value = $9,261,540,068.30; Fair value per share = $92.62; Upside / downside vs price = 8.96 %.
Frequently asked questions
What is a DCF valuation?
The present value of all future free cash flows of a business.
Why is terminal value so large?
It captures all cash flows after the projection period, often 60–80% of the value.
What discount rate should I use?
The weighted average cost of capital (WACC) for FCFF.