DCF Valuation Calculator

DCF Valuation Calculator: calculate dcf valuation for your business. Formula, benchmarks, and practical tips included.

A discounted cash flow (DCF) calculator estimates the value of a business, project, or investment by projecting future free cash flows and discounting them back to present value using an appropriate discount rate (typically WACC for unlevered company cash flows). DCF is a widely used intrinsic valuation method, but its result depends heavily on the cash-flow, growth, and discount-rate assumptions. A value below the current market price does not by itself establish that an asset is undervalued. Profit Margin Calculator provides the discount rate for DCF; Markup Calculator extends to enterprise value.

DCF value can change materially when forecast growth, terminal growth, or the discount rate changes. The effect depends on the gap between the discount rate and terminal growth, and on how much value comes from the terminal period. The sensitivity table below helps compare nearby assumptions.

Estimate unlevered FCF: EBIT × (1 − tax rate) + D&A − Capex − change in working capital. This calculator starts with Year 1 FCF and applies one constant growth rate for Years 2–5; use a full model when each year needs a separate forecast.
Enter a positive discount rate (WACC for unlevered company cash flows) and a terminal growth rate below it.
Calculate terminal value using the Gordon Growth Model: TV = FCF_last × (1 + g) ÷ (WACC − g), where g = perpetuity growth rate (typically 2–3% for mature companies).
Discount all FCFs and terminal value to present value: PV = Cash flow ÷ (1 + WACC)^year.
Sum all present values to get enterprise value. Enter net debt (total debt minus cash) to calculate equity value; a negative net debt means the company has net cash.

DCF valuation formula

PV of FCF = Σ [FCFₜ ÷ (1 + WACC)ᵗ] for t = 1 to n

Terminal value = FCFₙ × (1 + g) ÷ (WACC − g)

PV of terminal value = Terminal value ÷ (1 + WACC)ⁿ

Enterprise value = PV of FCFs + PV of terminal value

Equity value = Enterprise value − Net debt

Worked example matching the five-year constant-growth inputs: Year 1 FCF 10, annual forecast growth 15%, WACC 9%, terminal growth 3%, and net debt 40. The projected FCFs are 10, 11.50, 13.23, 15.21, and 17.49. Present value of forecast FCFs ≈ 51.21; present value of terminal value ≈ 195.14; enterprise value ≈ 246.35; equity value ≈ 206.35.

DCF sensitivity analysis

Terminal value contribution

In many DCF valuations, terminal value represents a large share of enterprise value, making the perpetuity growth rate and discount rate especially sensitive assumptions. The calculator displays a sensitivity table using WACC changes of ±1 percentage point and terminal-growth changes of ±0.5 points; cells where WACC is not above terminal growth are unavailable. These scenarios are illustrations, not confidence intervals. Comparing DCF value against market multiples (EV/EBITDA, P/E) provides a useful cross-check.

Business tips and best practices

Always present a DCF as a range, not a point estimate — build a sensitivity table of enterprise value vs WACC and terminal growth rate as standard practice.
Be consistent between FCF and discount rate — unlevered FCF (pre-debt service) should be discounted at WACC; equity FCF (post-debt service) at cost of equity.
Normalise FCFs before projecting — remove one-time items, smooth working capital, and use mid-cycle capex rather than any single year's exceptional capex.

Terminal value typically represents 60–80% of total DCF enterprise value for mature, slow-growth companies; 40–60% for high-growth companies with longer explicit forecast periods.
Warren Buffett has famously described DCF as the correct way to value any asset — but noted that the precision of the arithmetic disguises the imprecision of the assumptions.
A 0.5 percentage point reduction in WACC from 9% to 8.5% on a 10-year DCF with stable FCFs increases enterprise value by approximately 7–10%.

Common mistakes to avoid

Using a perpetuity growth rate above GDP growth — no company can grow faster than the economy forever; typical long-run perpetuity rates are 1.5–3% for developed markets.
Discounting equity cash flows at WACC — unlevered FCF goes to all capital providers and should be discounted at WACC; equity FCF should be discounted at cost of equity.
Not performing a sensitivity analysis — a single-point DCF valuation gives false precision; always show the range of values across reasonable assumption variations.

DCF valuations are financial models based on assumptions about future cash flows and discount rates. They are not predictions of actual future results. DCF valuations used in M&A transactions, fairness opinions, or public market communications are subject to applicable securities law and must be prepared by qualified financial professionals. Regulatory bodies (financial regulators, competition authorities) scrutinise DCF assumptions used in regulated proceedings. This calculator is for educational purposes only and does not constitute financial advice or a formal valuation.