DCF Calculator (Discounted Cash Flow Valuation)
Discounted Cash Flow valuation. Project 5-10 years of free cash flow, add a Gordon-growth terminal value, discount at WACC. Returns enterprise value, equity value, and per-share intrinsic value. The Wall Street workhorse model.
DCF Valuation Calculator
Year-by-year discounted cash flows
| Year | Free Cash Flow | Discount Factor | Present Value |
|---|
How to use the DCF calculator
Enter year-1 free cash flow
Free Cash Flow to the Firm (FCFF) for the first projection year, in $ millions. FCFF = EBIT · (1 − Tc) + Depreciation − CapEx − ΔWorking Capital. Take it from your operating model. Pull from the company's most recent 10-K or 10-Q for actual figures; for projections, your model's year-1 estimate. The accuracy of every subsequent year depends on this base.
Set FCF growth rate + projection horizon
Growth rate (% per year) applied uniformly to derive FCF in years 2..N. Realistic ranges: mature businesses 2-6%; established growth 8-15%; high growth 15-25%; hypergrowth (rare, <3-5 years sustainable) 30-50%. Horizon: 5 years for mature/cyclical; 10 years for growth companies still scaling. Avoid >10-year explicit projections — uncertainty dominates beyond a decade.
Set discount rate (WACC) + terminal growth
Discount rate is your WACC (RT-FIN-222) — the firm's blended cost of capital. Terminal growth represents perpetual growth after the explicit projection — should be at or below long-run GDP growth (2-3% developed markets, 4-5% emerging). Critical constraint: terminal growth MUST be strictly less than discount rate, or the perpetuity diverges to infinity. The further below WACC you set g, the more conservative your terminal value.
Enter net debt + shares outstanding
Net debt = total debt − cash and equivalents. Positive net debt reduces equity value; negative net debt (net cash, e.g. AAPL, MSFT) adds to equity value. Shares outstanding: diluted share count (basic + options + RSUs + converts). Both in millions. The bridge: Enterprise Value − Net Debt = Equity Value; Equity Value ÷ Shares = Per-Share Intrinsic Value.
Read equity value + per-share intrinsic
Two headlines: (1) Equity Value — what the equity is worth in total. Compare to market cap; if intrinsic > market, the stock may be undervalued. (2) Per-share intrinsic value — divide by diluted shares; compare to current trading price. Above current = undervalued (buy candidate); below current = overvalued (sell/avoid). The TV/EV share metric tells you how perpetuity-dependent your valuation is: >80% means tiny changes to g or r move the valuation dramatically.
DCF — the valuation method every investor learns and most get wrong
Discounted Cash Flow valuation is the conceptual foundation of corporate finance. The idea: an asset is worth the sum of its future cash flows, discounted to today at a rate that reflects their risk. John Burr Williams formalised the math in 1938 ("The Theory of Investment Value"); Myron Gordon added the constant-growth perpetuity in 1959. Every Wall Street equity research analyst, M&A banker, private equity associate, and corporate finance team builds DCFs daily. Every CFA Level 2 candidate spends weeks learning it. And yet most DCFs in practice are wildly wrong — not because the math fails, but because the inputs are wrong. The dirty secret of DCF: the model is mathematically rigorous, but two people with the same DCF formula and the same business can produce valuations 100% apart based on different assumption choices.
Why TV dominates everything
The biggest pedagogical lie in DCF is that "we project 10 years of cash flows and then add a small terminal value." In reality, for most growth companies, 60-85% of the entire DCF value sits in the terminal value. A 10-year explicit projection at 8% growth and 9% WACC produces a sum-of-PVs roughly equal to 10 × FCF1, but the terminal value (FCF11 ÷ (0.09 − 0.025)) discounted at (1.09)10 is often 3-5× larger. This means the entire DCF is, in practical terms, a Gordon growth model wearing a 10-year coat. Small changes to terminal growth (g) and discount rate (r) — both of which are notoriously hard to estimate — swing the valuation by 30-50%. Senior investment professionals know to sensitivity-test g ±0.5% and r ±0.5% — running 9-cell sensitivity tables is standard practice in every M&A pitch book.
For most growth-company DCFs, 70-80% of the valuation sits in the terminal value. The "10 years of explicit projections" is window dressing on what's really a Gordon growth perpetuity bet.
The four sins that destroy real-world DCFs
(1) Hockey-stick FCF growth — sales projections that compound at 25% forever. No company grows 25% for 10 years; even Tesla's 2014-2024 FCF growth averaged ~30% but with brutal cyclicality. (2) Terminal growth above GDP — if g exceeds long-run GDP growth, the company eventually becomes the economy. Not possible. Cap at 2-3% developed markets, 4-5% emerging. (3) Stale WACC — rates moved 400bps in 2022-2024; DCFs built on 2021 WACC assumptions massively overvalue companies. (4) Conflating FCFF and FCFE — FCFF is free cash flow to the entire firm (discount at WACC, subtract net debt). FCFE is to equity only (discount at re alone, no debt bridge). Mixing them double-counts or under-counts debt.
DCF for ASEAN markets — what to adjust
For Singapore-listed firms (DBS, SingTel, OCBC): use SGD-denominated FCF, SGD WACC (built from SGS 10-year as Rf), MAS-aligned tax rates (17%). For Malaysia: MYR cash flows, MGS 10-yr as Rf, 24% tax. For Indonesia: IDR or USD cash flows (most IDX large-caps are commodity-linked, dual-currency DCFs common), 22% tax, EM country risk premium added to Rm (typically 2-3%). For cross-border ASEAN M&A: convert everything to USD at forward FX rates and use USD WACC reflecting blended sovereign risk. Damodaran publishes annual country-risk-adjusted DCF templates for every ASEAN market.
10 Things to Know About DCF
Foundational equation: Value = Σ FCFt ÷ (1 + r)t + TV ÷ (1 + r)N. Every other valuation method is a variant of this.
John Burr Williams 1938 wrote the math; Myron Gordon 1959 added the growth-perpetuity terminal value. Both became Wall Street workhorses.
TV dominates. 60-85% of total DCF value usually sits in terminal value for growth companies. The "10-year projection" is mostly window dressing.
Gordon growth constraint: g must be strictly less than r. If terminal growth ≥ WACC, the perpetuity diverges to infinity.
Terminal growth shouldn\'t exceed long-run GDP growth. ~2-3% developed markets, ~4-5% emerging. Above that = mathematical impossibility.
FCFF vs FCFE: discount FCFF at WACC, subtract net debt for equity value. Discount FCFE at re alone — no debt bridge. Mixing the two is the most common DCF error.
1% WACC change = ~20% DCF value change for typical 10-year projections. Sensitivity tables on WACC are standard practice.
Use net debt (debt − cash) for the bridge. Apple\'s ~$60B net cash means equity value > enterprise value for AAPL — opposite of leveraged firms.
Diluted shares for per-share value: basic + options + RSUs + convertibles. Using basic shares overstates per-share intrinsic value.
DCF is one of three valuation methods; the others are comparable trading multiples and precedent M&A transactions. Triangulate all three for fairness opinions.
Frequently asked questions
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This tool uses FCFF (Free Cash Flow to Firm) — the standard practitioner approach. FCFF = EBIT·(1−T) + D&A − CapEx − ΔWC. Discount at WACC, then subtract net debt at the end to bridge to equity value. FCFE (Free Cash Flow to Equity) = Net Income + D&A − CapEx − ΔWC + Net Borrowing. Discount FCFE at cost of equity (re), not WACC, and don\'t subtract debt at the end (debt is already in the FCFE numerator). The two methods produce the same equity value when done correctly, but FCFF is more common in M&A and equity research because changes in capital structure flow more cleanly through WACC than through FCFE.
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Normal — for most growth companies, terminal value is 60-85% of total EV. The reason: explicit cash flows over 10 years sum to ~10×FCF1, but the Gordon growth perpetuity captures cash flows from year 11 to infinity — that\'s a much longer stream even after discounting. To reduce TV dominance: (a) extend the explicit projection (use 15 years), (b) use a "fade-down" growth assumption where annual growth declines linearly toward terminal g, or (c) use an exit-multiple terminal value (EV/EBITDA × year-N EBITDA) instead of Gordon growth — better for finite-life companies.
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The upper bound is long-run GDP growth: ~2-3% for developed markets (US, EU, Japan, Singapore), ~4-5% for emerging markets (Indonesia, Vietnam, India). Above that, the firm eventually becomes the entire economy — mathematically impossible. Conservative practice: use 2% for developed-market companies, 3% for emerging-market companies. For declining/sunset industries (legacy print media, tobacco in developed markets): use 0% or negative terminal growth. For long-cycle infrastructure (utilities, renewables, regulated assets): terminal growth ≈ expected inflation (2-3%).
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Three approaches, increasing in rigor. (1) Single growth rate — this tool\'s default: pick a growth rate, compound it. Fine for stable companies; lazy for growth companies. (2) Two-stage — explicit years 1-5 at higher growth (e.g. 15-25%), explicit years 6-10 fading to terminal g. Better for companies in early growth phase. (3) Bottom-up FCF model — project revenue, then EBIT margin, then CapEx as % of revenue, then NWC as % of revenue, derive FCF from first principles. The standard practitioner approach for M&A and serious equity research. Build the FCF projection in Excel/Google Sheets and bring the year-1 + average growth here for quick sensitivity testing.
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For growth companies: yes, in production work. Holding 20% FCF growth constant for 10 years implies the company is still growing 20% in year 10, which then immediately drops to terminal g (typically 2-3%) — a discontinuous jump that\'s unrealistic. A fade-down (linear or geometric decay from initial growth to terminal growth over the projection period) is more defensible. This tool uses a constant rate for simplicity — for serious valuation, build a fade-down growth schedule in your spreadsheet, sum the PVs manually, and use this tool to verify the terminal value math.
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For a typical 10-year DCF with 60-80% TV share, every 100bps move in WACC produces a 15-25% move in equity value — sometimes more. Pre-2022 rate-hiking cycle, WACC for the S&P 500 averaged ~7%; mid-2026 it sits ~9-10%. That single change re-rated the index multiple from ~25× forward P/E to ~17×. The lesson: run sensitivity tables. A 9-cell table with WACC ±0.5% / ±1.0% on one axis and terminal growth ±0.5% / ±1.0% on the other is the minimum for any serious DCF presentation. The cell-to-cell variation is your "valuation range" — and it\'s usually wider than people expect.
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Three possibilities. (1) Market is wrong — i.e. the stock is genuinely mispriced. Possible but rare; markets aren\'t perfectly efficient but they\'re usually approximately right. (2) Your DCF is wrong — most common. Check: are growth assumptions defensible? Is WACC current? Is terminal growth too high? Is FCFF projection too optimistic about margins? (3) Different time horizons — DCF gives intrinsic value, the market may be reflecting short-term sentiment, momentum, or factors your DCF doesn\'t capture (regulatory risk, management quality, brand value, optionality). Sanity-check against trading multiples (EV/EBITDA, EV/Sales) for the industry — if your DCF puts you 50% above industry-average multiples, your assumptions probably need revisiting.
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Several cases. (1) Pre-revenue companies — no FCF to project; use comparable transaction multiples or real-options analysis instead. (2) Highly cyclical commodity producers — mid-cycle FCF rather than current-year is essential; DCF based on peak earnings overstates value. (3) Distressed/turnaround — DCF assumes going-concern; for likely-bankruptcy candidates, liquidation value matters more. (4) Asset-heavy regulated utilities — regulated allowed returns often produce DCF values close to RAB (regulatory asset base) regardless of growth assumptions. (5) Real options / optionality-heavy — biotech, mining exploration, deep-tech R&D. The value lives in optionality that DCF undervalues; use Black-Scholes-Merton real options or Monte Carlo simulation instead.
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No. Cash flow projections, WACC, terminal growth, net debt, share count — every input stays in your browser. The entire DCF computation runs as client-side JavaScript: PV of each year, terminal value via Gordon growth, enterprise-to-equity bridge, per-share value. Open DevTools → Network when you click Run and you\'ll see zero outbound requests. Safe for confidential M&A and equity research work.
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Original mathematical foundation: Williams JB. The Theory of Investment Value. Harvard University Press, 1938. Gordon growth perpetuity: Gordon MJ. "Dividends, Earnings, and Stock Prices." Review of Economics and Statistics 1959;41(2):99-105. Practitioner standard: Damodaran A. Investment Valuation (3rd ed.). Wiley. Wall Street\'s favourite reference: Rosenbaum & Pearl, Investment Banking: Valuation, LBOs, M&A, IPOs. Damodaran\'s online data archive (pages.stern.nyu.edu/~adamodar/) has industry-average WACC, growth rates, FCF margins, and ready-to-use DCF templates updated annually. McKinsey\'s Valuation is the gold-standard treatment for senior practitioners.
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