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Discounted Cash Flow Valuation Calculator

Enter the cash flow, growth, discount rate and horizon to run a DCF valuation.

How it is calculated

Enter the free cash flow of year 1, the yearly growth rate, the discount rate, the number of forecast years and the terminal growth rate. The three rates are percentages, for example 10 for 10%, and terminal growth defaults to 2.5% if left empty. Cash flow in year t is CFt = CF1 × (1 + g)t−1, discounted by CFt / (1 + r)t. The terminal value uses the Gordon formula TV = CFn × (1 + tg) / (r − tg), discounted back by (1 + r)n. Enterprise value is the sum of the explicit and terminal present values.

Years are cut to a whole number. There is no result if years are zero or less or above 200, the discount rate is zero or less, or the discount rate is not higher than the terminal growth rate. A single growth rate is held for every forecast year and the amounts are in US dollars.

Worked example

Year-1 cash flow 100, growth 10%, discount rate 10%, five years, terminal growth 2.5%. The cash flows are 100, 110, 121, 133.10 and 146.41. Because growth equals the discount rate, each one has a present value of 90.91, so the explicit total is 5 × 90.91 = $454.55. Terminal value: 146.41 × 1.025 / (0.10 − 0.025) = 2,000.94, which discounted five years is $1,242.42. Enterprise value: 454.55 + 1,242.42 = $1,696.97. About 73% of it comes from the terminal value.

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Common mistakes

  • Entering rates as decimals. Typing 0.10 means 0.1%, not 10%, and gives a very different valuation.
  • Choosing a terminal growth rate close to the discount rate. The denominator r − tg then becomes tiny and the terminal value explodes; with a 10% rate, going from 2.5% to 5% raises it by about 54%.
  • Treating the output as equity value. It is enterprise value, so net debt must be subtracted and cash added before dividing by shares.
  • Entering the current year's cash flow as year 1. The tool treats the figure as year-1 cash and discounts it a full year, so use next year's expected cash flow.
  • Forecasting too few years while keeping a high growth rate. The terminal value then assumes the jump to a low steady rate happens too early or too late, which matters because it carries most of the value.

Sources

About this calculator

A discounted cash flow (DCF) valuation estimates what a business is worth today by projecting its future free cash flows and discounting each one back to present value using PV = CF ÷ (1 + r)ᵗ, where r is the discount rate (typically the weighted average cost of capital) and t is the number of years out. Beyond the explicit forecast period, a terminal value — usually estimated with the Gordon growth model, TV = CFₙ(1 + g) ÷ (r − g) — captures all cash flows beyond the forecast horizon, and its present value is added to the sum of the discounted forecast years to get the total enterprise value.

Equity analysts, investment bankers, and corporate finance teams use DCF as one of the core methods for valuing companies, private equity targets, and capital projects, because it ties value directly to expected cash generation rather than market comparables. Small changes to the discount rate or terminal growth assumption can swing the resulting valuation significantly, which is why analysts typically run the model across a range of assumptions rather than relying on a single output.

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Comments (1)

  • Editorial team

    Treat the output as one point on a range. With year-1 cash flow 100, growth 10%, five years and terminal growth 2.5%, a 10% discount rate gives 1,696.97, while 9% gives 1,967.75 and 11% gives 1,490.16, a swing of roughly +16% and -12% from a single point of rate. Also note the result is enterprise value; subtract net debt yourself to get to equity. Which discount rate and terminal growth pair do you use, and how do you justify them?

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