Discounted Cash Flow (DCF) Calculator
DCF values an investment by the cash it's expected to produce, discounted back to today's dollars. It's how professionals price businesses, projects, and acquisitions.
Formula: present value = Σ (cash flow each year ÷ (1 + discount rate)^year), plus a discounted terminal value. Terminal value: the perpetual value beyond the projection window, modeled as last-year cash flow × (1 + terminal growth) ÷ (discount rate − terminal growth) — only meaningful when the discount rate exceeds the terminal growth rate. Discount rate: use the weighted average cost of capital (WACC) or your required return — a higher rate lowers value. Caveat: DCF is sensitive to assumptions; small changes in growth or discount rate swing the result. Model a range of scenarios, not one number.
FAQ
What is DCF used for?
Valuing a business, project, or acquisition by discounting its expected future cash flows to present value. It's the standard professional method for intrinsic value.
How does the discount rate affect the valuation?
Directly and strongly — a higher discount rate reduces present value. The rate should reflect the risk and opportunity cost of capital; use WACC or a comparable required return.
What is terminal value and why does it matter?
The value of all cash flows beyond your explicit projection years, captured with a perpetual-growth formula. It's often 50-75% of a DCF's total value, so the terminal growth assumption deserves scrutiny.
Figures are editable example defaults for modeling, not quotes or advice. Financial, tax, and medical outcomes vary with your situation — verify with a qualified professional (CFP, CPA, tax advisor, or veterinarian).