CashFlowDCF

DCF Calculator

Project future cash flows, discount them back to today, and add a terminal value to estimate intrinsic worth.

Discount rate

Terminal growth rate

Projected cash flows (comma-separated)

Enter annual free cash flows for each projection year

Total DCF value

$97,066

Positive intrinsic value

PV of cash flows: $25,816
Terminal value: $114,750
PV of terminal value: $71,251

What you entered

Discount rate: 10%Terminal growth rate: 2%Cash flows: $5,000, $6,000, $7,000, $8,000, $9,000

1
PV of Year 1 cash flow
$5,000.00 ÷ (1 + 10%)^1= $4,545.45
2
PV of Year 2 cash flow
$6,000.00 ÷ (1 + 10%)^2= $4,958.68
3
PV of Year 3 cash flow
$7,000.00 ÷ (1 + 10%)^3= $5,259.20
4
PV of Year 4 cash flow
$8,000.00 ÷ (1 + 10%)^4= $5,464.11
5
PV of Year 5 cash flow
$9,000.00 ÷ (1 + 10%)^5= $5,588.29
6
Sum of PV cash flows
Σ PV of CF₁ through CF5= $25,815.74
7
Terminal value (Gordon Growth)
$9,000.00 × (1 + 2%) ÷ (10% − 2%)= $114,750.00
8
PV of terminal value
$114,750.00 ÷ (1 + 10%)^5= $71,250.72
9
Total DCF value
$25,815.74 + $71,250.72= $97,066.46

Result

Total DCF value: $97,066

Discounting 5 years of projected cash flows at 10% and applying a 2% terminal growth rate gives an intrinsic value of $97,066.

DCF valuation of five years of cash flow plus a terminal value

Each row projects five years of cash flow growing 5% a year from the base shown, discounts them at 10%, and adds a terminal value using 2.5% perpetual growth.

Year 1 cash flow	PV of 5 years	Terminal value	PV of terminal value	Total enterprise value
$100,000	$413,388	$1,640,000	$1,018,311	$1,431,699
$200,000	$826,775	$3,280,000	$2,036,622	$2,863,397
$500,000	$2,066,938	$8,200,000	$5,091,555	$7,158,493
$1,000,000	$4,133,877	$16,400,000	$10,183,110	$14,316,987

The uncomfortable lesson is in columns two and four: the terminal value contributes about 71% of the total in every row, so most of a DCF valuation rests on an assumption about what happens after the forecast period rather than on the forecast itself. That makes the terminal growth rate the most sensitive input in the model - raising it from 2.5% to 3.5% here would lift the valuation materially, and any rate at or above the discount rate produces an infinite value, which is why long-run growth is normally capped near expected inflation or GDP growth. Use WACC as the discount rate, and treat the output as a range produced by a range of assumptions rather than a single number.

How DCF works

A dollar tomorrow is worth less than a dollar today. DCF discounts each projected future cash flow by (1 + r)^n, where r is the discount rate (usually WACC) and n is the year. Summing those present values gives you the intrinsic value of the cash flows over the projection period.

Terminal value and Gordon Growth

Because you can't project cash flows forever, a terminal value captures value beyond the forecast horizon. The Gordon Growth model assumes cash flows grow at a constant rate g forever: TV = CF_last × (1 + g) / (r − g). This terminal value is then discounted back to today. In most DCF models, terminal value accounts for 60–80% of total value.

Frequently asked questions

How do you value a company using DCF?

1) Project free cash flows for 5–10 years. 2) Calculate terminal value using Gordon Growth or exit multiple. 3) Discount all cash flows back to present using WACC. 4) Sum them up = enterprise value. 5) Subtract net debt = equity value. 6) Divide by shares outstanding = intrinsic price per share.

What discount rate should I use in a DCF?

Use WACC for enterprise value (most common), or cost of equity for equity-only valuation. Typical ranges: large-cap stable companies 7–10%, mid-cap 10–13%, small-cap or emerging 13–18%. Higher risk = higher discount rate = lower present value. A 1% change in WACC can shift the valuation by 10–20%.

Why does terminal value dominate DCF models?

Terminal value typically accounts for 60–80% of total DCF value because it captures ALL cash flows beyond the projection period (theoretically, forever). This makes the terminal growth rate assumption critically important — a small change (2% vs 3%) dramatically swings the result. Always sensitivity-test the terminal growth rate.