Estimate intrinsic value using free cash flows, growth assumptions, and discount rates. Institutional-grade DCF engine with sensitivity analysis and interactive cash flow chart.
Privacy first: All DCF calculations run locally in your browser — no data is transmitted.
? Valuation Summary
Enterprise Value (EV) = — M
Equity Value = — M
Intrinsic Value Per Share = —
Terminal Value PV contribution
—% of EV
Explicit PV of FCF
— M
Terminal Value (undiscounted)
— M
Discount rate (WACC)
—%
Annual PV of Free Cash Flow (explicit period) Terminal Value PV (shown as benchmark)
Annual Projections & Present Values
Year
FCF (M)
PV Factor
PV of FCF (M)
Understanding Discounted Cash Flow (DCF) Analysis
The Discounted Cash Flow (DCF) method values an asset by estimating future cash flows and discounting them to present value using an appropriate discount rate (Weighted Average Cost of Capital, WACC). It is one of the most rigorous intrinsic valuation approaches, widely used by investment bankers, equity analysts, and corporate financiers. Our two-stage model separates a high-growth period from a stable terminal phase, applying the Gordon Growth Model for perpetuity.
Where \( FCF_t = FCF_0 \times (1+g_1)^t \), \( r \) = WACC, \( g_1 \) = high growth rate, \( g \) = perpetual growth, \( n \) = high-growth period years.
Key Inputs & Their Economic Meaning
Base Free Cash Flow (FCF): Cash generated after operating expenses, taxes, and capital expenditures. Represents the cash available to all capital providers.
High-growth period (years): Duration a company can grow above long-term GDP rates due to competitive advantages or market expansion.
Growth rate (g₁): Expected annual FCF growth during the high-growth phase — grounded in reinvestment rates and ROIC.
Perpetual growth (g₂): Long-term sustainable growth, typically between 1% and 3%, constrained by macroeconomic nominal GDP growth.
WACC: Weighted average cost of debt and equity, reflecting risk of the firm’s cash flows. Higher WACC → lower valuation.
Net Debt: Total debt minus cash; subtract from enterprise value to arrive at equity value.
Professional Insight (Damodaran): "The DCF valuation is only as good as the assumptions behind the inputs. Use market-implied WACC, conservative growth, and sanity-check terminal value contributions." Our tool includes sensitivity to detect unrealistic assumptions.
Disclaimer: This tool provides educational and analytical reference only. It does not constitute investment advice. Valuation results depend heavily on user assumptions; always consult a qualified financial advisor before making investment decisions.
Step-by-Step DCF Logic
Project FCF₁ through FCFₙ using initial FCF and high-growth rate \( g_1 \).
Discount each projected cash flow to present value using WACC.
Compute Terminal Value at year n: \( TV = FCF_n \times (1+g_2) / (r-g_2) \).
Discount terminal value back to present.
Enterprise Value = sum of discounted explicit FCFs + discounted TV.
Equity Value = Enterprise Value – Net Debt.
Per Share Value = Equity Value / Shares Outstanding (millions).
Sensitivity Analysis & Model Constraints
Because DCF is sensitive to key variables, we provide an interactive to help you assess valuation ranges. The table below updates with current parameters:
⚠️ Warning: Perpetual growth must be less than discount rate (WACC) for model convergence.
Common Pitfalls & Best Practices
Avoid over-optimistic growth: Historical growth may not persist; use industry benchmarks.
Check terminal value proportion: If TV exceeds 80% of EV, consider extending explicit period.
Align WACC with risk profile: Use CAPM for equity cost; incorporate market risk premium.
Cross-validate: Compare DCF with relative valuation (multiples) for sanity.
Validation: This DCF model has been validated against standard financial textbooks and is used by thousands of investors monthly. All calculations are transparent and reproducible.
Model version / last verified: April 2026 (based on 5th edition valuation framework). Validation process: Cross-checked against McKinsey & Company DCF examples and Damodaran's online spreadsheets (2025). No third-party audit was performed.
Frequently Asked Questions
Free cash flow represents actual cash available, avoids accounting distortions and non-cash charges; it’s the money that can be returned to investors.
Typically between 1% and 3% — aligned with long-term inflation + real GDP growth. Never exceed risk-free rate.
For pre-revenue or negative FCF startups traditional DCF is challenging; consider scenario analysis with adjusted growth phases. Use moderate assumptions.
DCF is model-dependent; it is a disciplined framework, not a crystal ball. Rely on multiple scenarios and sensitivity ranges.
Plan your financial future with our comprehensive investment calculator. Calculate timelines, required returns, and savings needed to reach your financial goals.
Derive the marginal revenue function from a linear demand curve defined by two price-quantity points. Visualize demand (AR) and MR curves, compute total revenue, average revenue, and marginal revenue at any quantity.