About the DCF Calculator
This DCF calculator estimates what a business is worth today based on the cash it is expected to generate in the future. You enter the latest annual free cash flow, a growth rate for the next five years, a slower growth rate for years six to ten, your discount rate and a long-run terminal growth rate. The model discounts every projected cash flow back to today, adds a Gordon-growth terminal value, subtracts net debt and divides by shares outstanding to give an intrinsic value per share.
It is built for investors who want to sanity-check a share price, students learning valuation, and anyone comparing a “fair value” estimate against the market. Enter cash flow, net debt and shares in the same units (for example millions) so the per-share result comes out in dollars.
A DCF is only as good as its assumptions. Small changes to the discount rate or terminal growth can move the answer a lot, which is why the calculator shows how much of the value comes from the terminal value and compares the result with the current price. Treat the output as a range to test, not a precise target.
With the default inputs, the intrinsic value per share is $44.62. Change any value above to recalculate instantly.
How to use the dcf calculator
- 1Enter the latest annual free cash flow (operating cash flow minus capital expenditure).
- 2Set a growth rate for years 1–5 and a lower rate for years 6–10.
- 3Enter your discount rate and a terminal growth rate below it (usually 2–3%).
- 4Add net debt and shares outstanding in the same units as the cash flow.
- 5Compare the intrinsic value per share with the current price and test more conservative assumptions.
Formula and method
Free cash flow is grown at the first-stage rate for years 1–5 and at the second-stage rate for years 6–10. Each year’s cash flow is divided by (1 + r)ᵗ to convert it into today’s money, where r is your discount rate — typically the weighted average cost of capital (WACC) or the return you require.
After the forecast period the business is assumed to grow forever at the terminal rate g, valued with the Gordon growth formula FCFₙ × (1 + g) ÷ (r − g) and discounted back n years. The sum is the enterprise value; subtracting net debt gives equity value, and dividing by shares outstanding gives intrinsic value per share. Cash flows are assumed to arrive at the end of each year.
- FCFₜ
- Projected free cash flow in year t
- r
- Discount rate (WACC or required return)
- g
- Terminal (perpetual) growth rate
- n
- Number of forecast years (5 or 10)
Worked examples
10-year DCF: $1B FCF, 10% then 6% growth, 9% discount rate
Free cash flow of $1,000M grows 10% a year to about $1,611M in year 5, then 6% a year to about $2,156M in year 10. Discounted at 9%, the ten cash flows are worth about $9.96B today and the terminal value about $14.36B, for an enterprise value of $24.31B. After $2B of net debt and 500M shares, intrinsic value is about $44.62 — roughly 26% below a $60 share price, so the stock looks expensive on these assumptions.
5-year DCF for a net-cash company
Cash flow of $250M grows 15% a year for five years to about $503M. Discounted at 10%, those five years are worth about $1.43B and the terminal value (3% growth forever) about $4.59B. Adding $500M of net cash and dividing by 100M shares gives about $65.25 per share, about 45% above a $45 price.
Higher discount rate for a riskier business
Raising the discount rate from 9% to 12% with the same cash flows cuts the present value of the terminal value from about $14.36B to $7.49B, and intrinsic value falls from $44.62 to about $28.22 per share. This shows how sensitive a DCF is to the required return.
Frequently asked questions
What discount rate should I use in a DCF?+
Most analysts use the company’s weighted average cost of capital (WACC), often 7–10% for large, stable companies and higher for small or risky ones. Individual investors often use their own required return instead, such as 8–12%.
What is a reasonable terminal growth rate?+
The terminal rate assumes growth forever, so it should not exceed long-run nominal economic growth. Rates of 2–3% are common. It must always be lower than the discount rate, otherwise the formula breaks down.
Why is most of the value in the terminal value?+
For growing companies, cash flows beyond year 10 are worth a lot in total, so the terminal value often makes up 60–80% of enterprise value. That is normal, but it means your long-run assumptions matter more than the near-term forecast.
What is free cash flow?+
Free cash flow is operating cash flow minus capital expenditures — the cash a business generates after maintaining and expanding its assets. It is found in the cash flow statement of annual and quarterly reports.
Why subtract net debt?+
Discounting free cash flow values the whole business (enterprise value), which belongs to both lenders and shareholders. Subtracting debt and adding back cash leaves the value that belongs to shareholders only.
Is a DCF accurate?+
A DCF is a disciplined way to think about value, but the result depends entirely on your growth and discount assumptions. Test several scenarios and use a margin of safety rather than treating one number as the true value.
Results are estimates for educational purposes and are not financial advice. Rates, fees and terms vary — confirm with your lender or a licensed advisor before making decisions.