DCF Calculator (Discounted Cash Flow Valuation)
Discounted Cash Flow valuation. Project 1-30 years of free cash flow, add a Gordon-growth terminal value, discount at WACC. Returns enterprise value, equity value, and per-share intrinsic value, with printed figures that add up.
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. Base it on the business, not on a rule of thumb: a mature company's cash flow grows roughly with its market, and a high rate held for every projection year ends in an abrupt step down to the terminal rate. Horizon: 5 years is common for mature or cyclical businesses, 10 years for companies still scaling.
Set discount rate (WACC) + terminal growth
Discount rate is your WACC — the firm's blended cost of capital. Terminal growth represents perpetual growth after the explicit projection — it should be at or below the long-run nominal growth of the economy the business sells into, in the currency of the cash flows. 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 tells you how perpetuity-dependent your valuation is; above 80% the page warns you.
DCF — the valuation method every investor learns and most get wrong
Discounted Cash Flow valuation is the conceptual foundation of corporate finance: an asset is worth the cash it will produce, discounted to today at a rate that reflects its risk. John Burr Williams set out the idea in The Theory of Investment Value (1938); Myron Gordon gave the constant-growth perpetuity used for the terminal value, with Eli Shapiro in 1956 and alone in 1959. The arithmetic is not where DCFs go wrong — the inputs are. Two analysts using the same formula on the same business can land far apart because they chose a different growth rate, discount rate or terminal assumption, which is why the result should always be read as one scenario among several.
Why TV dominates everything
The forecast years feel like the substance of a DCF, but the terminal value is usually the bigger number. On this page's defaults — $100M of free cash flow growing 8% a year for 10 years, a 9% discount rate and 2.5% terminal growth — the ten discounted forecast years sum to $880.5M, about 8.8 times the first year's cash flow, and the discounted terminal value adds $1,331.5M, about 1.5 times as much. The terminal value is 60.2% of enterprise value. It also carries most of the sensitivity: moving the discount rate from 9% to 8% raises equity value by 20.3%, and to 10% lowers it by 14.8%; moving terminal growth half a point either way moves it by about 5%. Run a grid of discount rates against terminal growth rates before you trust any single cell.
The forecast years are the part you can argue line by line. The terminal value is usually the bigger number, and it rests on just two inputs — the discount rate, and a growth rate that lasts forever.
The four sins that destroy real-world DCFs
(1) Hockey-stick FCF growth — a high growth rate held for every forecast year, then an abrupt drop to the terminal rate. (2) Terminal growth above the economy — if g exceeds the long-run nominal growth of the economy, the company eventually becomes larger than it. (3) Stale WACC — a discount rate built when interest rates were lower overvalues every cash flow in the model. (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 and an SGD WACC built from the 10-year SGS yield, and tax at IRAS's flat 17% corporate rate. For Malaysia: MYR cash flows and the 10-year MGS yield as Rf. For Indonesia: IDR or USD cash flows, with a country risk premium added to the equity premium — Damodaran's table updated 5 January 2026 puts it at 2.46% for Indonesia and 1.55% for Malaysia, and lists their corporate tax rates as 22% and 24%. For cross-border ASEAN M&A: put every cash flow and the WACC in one currency. Check the tax rate with the national authority before relying on it.
Williams 1938, Gordon 1959, and why terminal value is most of the number
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. On this page's defaults the terminal value is 60.2% of enterprise value — and the share rises as the discount rate falls.
Gordon growth constraint: g must be strictly less than r. If terminal growth ≥ WACC, the perpetuity diverges to infinity.
Terminal growth shouldn't exceed the long-run nominal growth of the economy, in the cash flows' currency — or the firm eventually outgrows the economy it sells into.
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.
One point of WACC: on this page's defaults, 9% → 8% raises equity value 20.3%; 9% → 10% cuts it 14.8%. The effect is not symmetric.
Use net debt (debt − cash) for the bridge. A company with more cash than debt has negative net debt, so its equity value is larger than its enterprise value.
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
-
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.
-
Normal. On this page's defaults it is 60.2%: ten years of discounted cash flow sum to about 8.8 × 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.
-
The upper bound is the long-run nominal growth of the economy the business sells into, measured in the same currency as the cash flows (nominal cash flows need a nominal rate). Above it, the firm eventually becomes larger than the economy. For declining industries, use zero or a negative rate. For regulated assets whose returns track prices, a rate near expected inflation is the usual anchor. Whatever you choose, it must be strictly below the discount rate — the calculator refuses it otherwise.
-
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.
-
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.
-
Very. On this page's defaults, cutting WACC from 9% to 8% raises equity value by 20.3% and raising it to 10% lowers it by 14.8% — the effect grows as WACC approaches the terminal growth rate. 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.
-
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.
-
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.
-
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.
-
Original mathematical foundation: Williams JB. The Theory of Investment Value. Harvard University Press, 1938. Gordon growth perpetuity: Gordon MJ, Shapiro E. "Capital Equipment Analysis: The Required Rate of Profit." Management Science 1956;3(1):102-110; 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/) publishes industry cost-of-capital data, country risk premiums and valuation spreadsheets. McKinsey's Valuation is the other standard practitioner text.
Method & sources
How it computes
FCF_t = FCF_1 × (1 + growth)^(t−1), discounted at the end of year t: PV_t = FCF_t ÷ (1 + r)^t. Terminal value TV = FCF_N × (1 + g) ÷ (r − g), refused unless r > g; PV(TV) = TV ÷ (1 + r)^N. EV = Σ PV_t + PV(TV); equity = EV − net debt; per share = equity ÷ shares. Printed in tenths of $1M, rounded so rows, EV and equity add up. RecaCorpFin.dcf.
What this tool implements
- Terminal growth must be strictly below the discount rate; the Gordon perpetuity has no finite value otherwise, and the tool refuses the input with that reason rather than printing a negative terminal value.
- Cash flows are discounted at the end of each year. The mid-year convention is deliberately not applied, and the page says so.
- Verified against closed forms: one year with no growth gives FCF/(1+r) + (FCF/r)/(1+r); a level perpetuity is the same at any horizon; equal growth before and after the horizon collapses to FCF₁ ÷ (r − g).
- Printed figures add up: EV is rounded once to $0.1M, the explicit and terminal PVs are split from it and the year rows from the explicit PV by largest remainder, and equity is printed EV minus printed net debt.
- The page's prose figures are computed from its own defaults and pinned in the tests: explicit years $880.5M (8.8 × FCF₁), terminal $1,331.5M, terminal share 60.2%; one point of WACC moves equity +20.3% (to 8%) and −14.8% (to 10%); half a point of terminal growth about 5%.
- ⚠️ The output is arithmetic, not a valuation: small changes to the discount rate or terminal growth move it a long way, so a single result is one scenario among several.
Sources
- Gordon MJ, Shapiro E. Capital Equipment Analysis: The Required Rate of Profit. Management Science 1956;3(1):102-110. doi:10.1287/mnsc.3.1.102
- Gordon MJ. Dividends, Earnings, and Stock Prices. Review of Economics and Statistics 1959;41(2):99-105. doi:10.2307/1927792
- Inland Revenue Authority of Singapore. Corporate Income Tax Rate, Rebates & Tax Exemption Schemes — flat 17%: https://www.iras.gov.sg/taxes/corporate-income-tax/basics-of-corp…
- Damodaran A. Country Default Spreads and Risk Premiums (updated 5 Jan 2026) — Indonesia 2.46%, Malaysia 1.55% country risk premium; corporate tax 22% / 24%: https://pages.stern.nyu.edu/~adamodar/New_Home_Page/datafile/ctry…
What can make this go out of date
- Nothing is fetched: the forecast, the discount rate and the terminal growth rate are judgements the reader supplies. The discount rate normally comes from a WACC, which normally comes from a CAPM cost of equity.
Abridged — the full review record for this tool runs longer than the list above.
Pick up where you left off
Stored only in this browser — never sent to our servers.