Free discounted cash flow (DCF) valuation calculator. Project 5-10 years of free cash flow, calculate terminal value, and discount to present value using WACC.
The Discounted Cash Flow (DCF) model is the gold standard for intrinsic valuation. It estimates what a business is truly worth by projecting future free cash flows and discounting them back to today's dollars using the weighted average cost of capital (WACC).
Unlike revenue multiples or comparable analysis, DCF is grounded in fundamentals: the actual cash a business generates. It forces you to make explicit assumptions about growth, margins, and risk — making it both powerful and transparent.
This calculator implements a full DCF with customizable projection period (5-10 years), Gordon Growth terminal value, and per-year cash flow table. Discounted cash flow analysis values a business or asset based on the present value of its future cash flows, adjusted for risk through a discount rate. Unlike market-based methods, DCF relies entirely on the fundamentals of the business rather than comparable transactions or public market sentiment. This calculator projects free cash flows, applies your chosen discount rate, adds a terminal value, and presents the result as intrinsic value.
DCF is the most defensible valuation method for any cash-flow-generating business. Investment bankers, private equity firms, and sophisticated investors rely on DCF models. By building your own, you understand exactly what assumptions drive the valuation and can stress-test each one. This transparency makes DCF the preferred method for investor presentations, M&A negotiations, and internal capital allocation decisions.
DCF = Σ [FCFₜ / (1 + WACC)ᵗ] + Terminal Value / (1 + WACC)ⁿ Terminal Value = FCFₙ₊₁ / (WACC − g) Where FCFₜ = projected free cash flow in year t, WACC = discount rate, g = terminal growth rate, n = projection years
Result: Enterprise Value: ~$196M
Year 1-5 FCFs grow at 15%: $11.5M, $13.2M, $15.2M, $17.5M, $20.1M. Terminal value = $20.1M × 1.025 / (0.10 − 0.025) = $275M. PV of projected FCFs = ~$56M. PV of terminal value = ~$171M. Total EV = ~$196M. Terminal value dominates at 75% of total.
Terminal value often represents 60-80% of a DCF valuation, which makes many analysts uncomfortable. To mitigate: extend the projection period, ensure terminal growth is conservative (2-3%), and cross-check with an exit multiple method (TV = final year EBITDA × industry multiple).
Always run a sensitivity table varying WACC (rows) and growth rate (columns). A robust DCF produces a range of values, not a point estimate. If the range is too wide, your assumptions need more research.
(1) Terminal growth > GDP growth, (2) Using revenue instead of free cash flow, (3) Not adjusting for working capital changes, (4) Forgetting to subtract net debt from enterprise value to get equity value, (5) Being overly optimistic on margins in outer years.
Use the Weighted Average Cost of Capital (WACC). For most mid-cap companies, this ranges 8-12%. Higher-risk companies (startups, emerging markets) may use 15-25%. The discount rate should reflect the riskiness of the cash flows being projected.
Terminal value captures all cash flows beyond the projection period in a single number. It assumes the business continues growing at a steady, modest rate forever. The Gordon Growth Model: TV = Final Year FCF × (1 + g) / (WACC − g). It typically represents 60-80% of total DCF value.
DCF is only as accurate as its inputs. Small changes in WACC or growth rate cause large valuation swings. Its value lies in making assumptions explicit and testable. Always present a range (base, bull, bear case) rather than a single number.
Typically 5-10 years. Use 5 years for stable, slow-growth businesses. Use 7-10 years for high-growth companies that need time to reach steady state. Beyond 10 years, individual year projections become unreliable — let terminal value handle the rest.
They answer different questions. DCF estimates intrinsic value based on fundamentals. Multiples estimate relative value based on what the market pays for similar companies. Best practice: use both and compare. If they diverge significantly, investigate why.
Free Cash Flow = Operating Cash Flow − Capital Expenditures. It represents cash available to all capital providers (debt and equity). For DCF, use unlevered FCF (before interest payments) to calculate enterprise value, then subtract debt to get equity value.