Discounted Cash Flow Calculator
Find the intrinsic value of any business or public stock by projecting future free cash flows, discounting them back to today's money, and factoring in terminal perpetuity.
How to Use This Calculator
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1
Enter baseline cash flow and horizon
Type the company's trailing 12-month free cash flow (cash from operations minus capital expenditures). Pick whether you'd like to forecast over 5 years or 10 years.
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2
Set growth and discount assumptions
Plug in your expected annual growth rate for the projection window, plus your discount rate (your hurdle rate or WACC). Add a conservative terminal rate (usually 2% to 3%).
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3
Bridge to equity and per-share price (optional)
If you're evaluating a publicly traded stock, enter balance sheet cash, total debt, and diluted shares outstanding to convert total company value into an intrinsic share price.
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4
Review the margin of safety
Enter the current trading price to see if the stock is undervalued or overvalued. You'll get an instant year-by-year cash flow table and a clean visual split between operating cash flows and terminal value.
The Formula
I built this tool because I got tired of Wall Street spreadsheets with 40 tabs that hide basic math behind mountains of confusing jargon. Strip away the fluff, and a discounted cash flow valuation boils down to two distinct components: the present value of explicit cash flows and the present value of the terminal perpetuity.
FCF_t = FCF_0 × (1 + g)^t
2. Present Value of Projected Cash Flow:
PV(FCF_t) = FCF_t ÷ (1 + r)^t
3. Terminal Value (Gordon Growth Perpetuity):
Terminal Value = [FCF_n × (1 + g_terminal)] ÷ (r − g_terminal)
4. Present Value of Terminal Value:
PV(Terminal Value) = Terminal Value ÷ (1 + r)^n
5. Enterprise Value & Equity Value:
Enterprise Value = ∑ PV(FCF_t) + PV(Terminal Value)
Equity Value = Enterprise Value + Cash − Total Debt
Intrinsic Value Per Share = Equity Value ÷ Shares Outstanding
Here is what each parameter means in practice:
- FCF_0 Starting free cash flow over the most recent 12 months (cash from operations minus capital expenditures).
- g Annual growth rate expected during the explicit projection period (e.g. 10% per year).
- g_terminal Perpetual long-term growth rate after the forecast window. It cannot exceed your discount rate and generally mirrors GDP expansion at 2% to 3%.
- r Discount rate (WACC or your required rate of return). This accounts for the time value of money and project risk.
- n Number of years in your explicit forecast period (5 or 10 years).
When I first read through a DCF model, terminal value blew my mind — it felt wild that 75% or more of a company's total valuation comes from a perpetuity formula that assumes infinite growth. You spend hours agonizing over years 1 to 5, but one tiny nudge to your perpetual rate moves the entire valuation by millions.
Example
Let's run through a realistic scenario for a mid-sized tech company with steady cash generation and a strong balance sheet:
Step 1: Project each year's free cash flow and discount it:
• Year 1: $1,000,000 × 1.10 = $1,100,000 → PV: $1,100,000 ÷ 1.091 = $1,009,174.31
• Year 2: $1,210,000 → PV: $1,210,000 ÷ 1.092 = $1,018,432.79
• Year 3: $1,331,000 → PV: $1,331,000 ÷ 1.093 = $1,027,776.21
• Year 4: $1,464,100 → PV: $1,464,100 ÷ 1.094 = $1,037,205.35
• Year 5: $1,610,510 → PV: $1,610,510 ÷ 1.095 = $1,046,721.00
Total PV of Forecast Cash Flows: $5,139,309.66
Step 2: Calculate terminal value and discount it back 5 years:
Terminal Value = [$1,610,510 × (1 + 0.025)] ÷ (0.09 − 0.025) = $1,650,772.75 ÷ 0.065 = $25,396,503.85
PV of Terminal Value = $25,396,503.85 ÷ 1.095 = $16,505,984.95 (76.26% of enterprise value)
Step 3: Calculate enterprise value, equity value, and per-share price:
Enterprise Value = $5,139,309.66 + $16,505,984.95 = $21,645,294.62
Equity Value = $21,645,294.62 + $500,000 (Cash) − $200,000 (Debt) = $21,945,294.62
Intrinsic Value Per Share = $21,945,294.62 ÷ 100,000 = $219.45
With the stock trading at $150.00, it is undervalued by 31.65%, giving you a healthy margin of safety.
Frequently Asked Questions
What is a discounted cash flow (DCF) calculation?
A discounted cash flow calculation estimates what an investment or business is worth today based on the cash it will generate down the road. Because money received in the future is worth less than money in your pocket today, future cash flows get discounted back using an annual required rate of return.
What discount rate should I use in a DCF model?
For corporate valuations, investors usually rely on the company's Weighted Average Cost of Capital (WACC), which combines the cost of equity and after-tax cost of debt. Retail stock investors often use a flat hurdle rate between 8% and 12%, depending on how risky or predictable the underlying business feels.
Why does terminal value make up such a big part of the total valuation?
A 5-year or 10-year projection only accounts for a fraction of a healthy company's lifespan. Terminal value bundles every dollar the business will ever produce from year six onwards into a single perpetuity, which is why it often makes up 65% to 85% of total enterprise value.
Why must the terminal growth rate be lower than the discount rate?
If a company's terminal growth rate matched or exceeded the discount rate, the Gordon Growth formula's denominator would hit zero or turn negative, implying infinite value. In real economics, no company can grow faster than the overall economy indefinitely, so terminal rates stay between 2% and 3%.
What is the difference between enterprise value and equity value?
Enterprise value represents the total operating worth of the business before considering how it's financed. Equity value adds back any cash sitting on the balance sheet and subtracts total outstanding debt, leaving the net dollar pool that belongs strictly to common shareholders. When I look at any projection myself, I keep it simple with a 10% discount rate and look for at least a 25% to 30% margin of safety before an investment feels reasonable.
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