DCF Valuation Calculator
Forecast, terminal value, and how much of the answer it is.
Work out DCF Valuation. Forecast, terminal value, and how much of the answer it is. Shows the working period by period rather than one number.
Usually WACC.
Must be below the discount rate, and below long-run GDP growth.
Debt less cash. Subtracted to get equity value.
Leave at zero to skip the per-share figure.
Small changes in the discount rate and terminal growth move this valuation enormously. Run both across a range and look at the spread; a single DCF number carries far less information than it appears to.
Enterprise value
$1,637
71% of it is terminal value
71% of this valuation comes from the terminal value — everything after year 5, computed from a perpetual growth rate nobody can know. That is normal rather than a flaw in these inputs, and it is why a DCF is best read as a structured opinion about the terminal assumptions rather than as a price.
How the DCF Valuation Calculator works
A discounted cash flow valuation projects free cash flow, discounts it, and adds a terminal value for everything beyond the forecast. The number worth watching is not the valuation but the share of it coming from that terminal value, which is routinely two thirds or more. A DCF is mostly a structured opinion about perpetual growth, and its apparent precision is the most misleading thing about it.
Also known as: DCF calculator · discounted cash flow valuation calculator · intrinsic value calculator · enterprise value DCF calculator
The calculation itself
Project free cash flow through an explicit forecast, discount each year at the cost of capital, and add the present value of a terminal value covering everything after.
Terminal value here uses Gordon growth: the final forecast year's cash flow, grown one more year, divided by the discount rate less the perpetual growth rate. That single division carries most of the valuation.
The total is enterprise value — the whole business, independent of how it is financed. Subtract net debt for equity value, divide by shares for a per-share figure.
In practice
Free cash flow of 100, growing 8% a year for five years, discounted at 10%, then 2% forever.
The five forecast years are worth 473 in present value. Year five's cash flow is 146.93, and the terminal value is 146.93 × 1.02 ÷ 0.08 = 1,873 — worth 1,163 once discounted back five years.
Enterprise value is 1,637, of which 71% is terminal value. Seven-tenths of this valuation is a single formula applied to a growth rate that extends beyond any forecast horizon.
Change that rate from 2% to 3% — a change well inside anyone's uncertainty — and enterprise value rises to 1,816, up 11%. Nothing about the business changed.
Why the terminal value dominates
A perpetuity is simply very large relative to five years of anything. Even discounted back, the tail beyond the forecast usually outweighs the part that was actually forecast.
Which means the effort typically goes in the wrong place. Careful modelling of five years of margins determines under a third of the answer, while two numbers chosen in an afternoon determine the rest.
Lengthening the forecast reduces the terminal share but does not remove the problem — it converts an assumption about perpetual growth into an assumption about years eight through twelve, which is not obviously better evidenced.
The exit-multiple alternative has the same property wearing different clothes: it substitutes an assumption about what someone will pay for one about how fast the business grows forever.
Where the figure deceives
The formula diverges as terminal growth approaches the discount rate, and valuations from rates within a point or two of it mean nothing. This page refuses to compute rather than returning a very large number, because a very large number would be believed.
Perpetual growth above long-run economic growth implies the company eventually becomes the economy. It is a common input and it is never right.
A DCF's precision is its most misleading feature. Producing a value to the dollar from two contested inputs invites a confidence the method cannot support.
And free cash flow itself is a modelling choice — what counts as maintenance capital expenditure, how working capital moves, whether stock compensation is a real cost. Two analysts can build defensible and materially different forecasts from identical accounts.
Acting on it
Read the terminal share first. If it is above about 75%, the model is mostly an opinion about the terminal assumptions and should be presented as one.
Run the discount rate and terminal growth as a grid and report the range. A single figure hides everything that matters.
Sanity-check the implied exit multiple against what comparable businesses actually trade at. A terminal value implying a multiple far outside that range is a signal the assumptions have drifted.
Not financial advice. This calculator is for planning and illustration, not financial advice. Real products carry fees, taxes, and terms it does not model. Confirm figures with your lender or a qualified adviser before committing.
Frequently asked questions
How does a DCF valuation work?
Project free cash flow for a forecast period, discount each year at the cost of capital, then add the present value of a terminal value representing everything after. That total is enterprise value; subtract net debt for equity value.
What is terminal value and why does it dominate?
The value of all cash flows beyond the explicit forecast, usually via Gordon growth: final year cash times one plus perpetual growth, divided by the discount rate less that growth. It dominates because a perpetuity is very large relative to five years of anything.
What terminal growth rate should I use?
Below long-run economic growth, because no company outgrows the economy forever. The formula diverges as terminal growth approaches the discount rate, and rates within a point or two of it produce valuations that mean nothing.
Why do two analysts get very different DCF values?
Because small changes in the discount rate and terminal growth move the answer enormously, and both are judgements. A DCF is best read as a sensitivity exercise rather than as a price.
What is the difference between enterprise and equity value?
Enterprise value is the whole business regardless of financing. Equity value subtracts net debt, and is what the shares are worth. Comparing one against the other is a common and expensive confusion.
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