DCF Calculator: Discounted Cash Flow
Estimate a company's intrinsic value by projecting free cash flows, discounting them at your required rate of return, and adding a terminal value.
What is DCF?
Discounted Cash Flow (DCF) is a valuation method that estimates the intrinsic value of a business by projecting its future free cash flows and discounting them back to the present using a required rate of return, typically the Weighted Average Cost of Capital (WACC). The underlying principle is that a dollar received in the future is worth less than a dollar today. DCF is the foundation of fundamental valuation and is used by equity analysts, investment bankers, and long-term investors to determine whether a stock trades above or below its fair value. The output is highly sensitive to the growth rate and discount rate assumptions, and small changes in WACC can dramatically change the result, which is why sensitivity analysis is a key part of any DCF model.
Formula
Intrinsic Value = Σ [ FCF_t / (1 + r)^t ] + TV / (1 + r)^n
where:
FCF_t = Free Cash Flow in year t (grown by g each year)
r = Discount rate (WACC)
TV = Terminal Value = FCF_n × (1 + g_t) / (r - g_t)
g_t = Terminal growth rate (long-run GDP ≈ 2-3%)
n = Projection years
Calculator
How to Use
- 1Find base FCF: Look up the most recent 12-month (TTM) free cash flow from the cash flow statement. FCF = Operating Cash Flow - Capital Expenditures.
- 2Choose a growth rate: Use historical FCF growth or analyst consensus. Be conservative, as high growth rates compound fast and produce aggressive valuations.
- 3Set the discount rate: Use WACC. S&P 500 companies typically range 8-12%. Higher risk businesses deserve higher discount rates.
- 4Set terminal growth: Long-run nominal GDP growth ≈ 2-3%. The terminal value can represent 60-80% of total DCF value, so this assumption matters enormously.
- 5Add shares outstanding: Optional. Divide total enterprise value by diluted shares to get per-share intrinsic value you can compare to the market price.
Worked Example
Example: Hypothetical Company
Base FCF
$500M
Growth Rate
10% / year
Discount Rate
10%
Terminal Growth
3%
Projection
10 years
Shares Out.
1,000M
With a 10% FCF growth for 10 years, discounted at 10%, then a terminal value using 3% long-run growth, the model produces an enterprise value of approximately $10.8B, or roughly $10.80 per share. If the stock trades at $8, it may be undervalued; at $15, potentially overvalued. Always stress-test your WACC and growth assumptions.
Auto-fill from SEC EDGAR
Beat Index members can select any S&P 500 ticker and automatically populate base FCF and shares outstanding directly from live EDGAR filings.