What discount rate should I use in the Discounted Cash Flow (DCF) Calculator?

Use a rate that reflects the company’s opportunity cost of capital and risk — typically its weighted average cost of capital (WACC) for enterprise-level DCFs, or a required return on equity if you’re valuing equity directly. Higher risk or more uncertainty usually means a higher discount rate.

How many years of free cash flow should I project in this DCF?

Most users project 5–10 years, long enough for cash flows to normalize but not so long that assumptions become pure guesswork. If the business is very stable, a shorter horizon (5 years) is often enough; for high-growth companies, you might extend it to 10 years but gradually fade growth down.

When should I choose the Gordon Growth method vs the Exit Multiple for terminal value?

Use Gordon Growth when you can reasonably assume long-term, perpetual growth at a modest rate below the discount rate (e.g., mature or steady businesses). Use an Exit Multiple when you prefer to express terminal value as a valuation multiple (like EV/EBITDA) based on peer comps or market norms, especially for businesses with more uncertain long-run growth.

How do I interpret the “DCF equity value per share” result compared with the current share price?

If the DCF equity value per share is above the current share price, your inputs imply the stock may be undervalued; if it’s below, the stock may be overvalued. Always treat this as a range, not a precise truth — small changes in discount rate, growth, or terminal assumptions can move the valuation significantly.

Discounted Cash Flow (DCF) Calculator – Intrinsic Value & Free Cash Flow Model

Discounted Cash Flow (DCF) Valuation Calculator (Multi‑Year)

Estimate intrinsic equity value from projected free cash flows, a discount rate (e.g., WACC), and a terminal value using either the Gordon Growth model or an exit multiple. Optionally compare to the current share price.

Projection Mode

Provide a starting Free Cash Flow and a constant annual growth rate for N years.

Discount Rate (annual)

Use mid‑year convention

Projection Years

Starting Free Cash Flow (Year 1)

Annual Growth Rate (explicit period)

Free Cash Flow by Year

Terminal Value Method

TV = FCF(N+1) ÷ (r − g). Requires terminal growth g < discount rate r.

Terminal Growth Rate

Exit Multiple (× FCF in final year)

Net Debt

Shares Outstanding

Current Share Price (optional)

Results

Equity Value per Share $
Equity Value $
Enterprise Value (DCF) $
PV of Explicit FCF $
PV of Terminal Value $
Terminal Value (undiscounted) $
Upside vs Current Price %
Valuation Classification

What is Discounted Cash Flow (DCF)?

Discounted cash flow is a valuation framework that treats a business as the present value of its future free cash flows, adjusted for the time value of money and risk.

In corporate finance, DCF links operating performance and capital allocation (through free cash flow to the firm or free cash flow to equity) to value creation by converting projected cash flows into enterprise value and, after adjusting for net debt and other claims, equity value per share.

Because it makes every growth, margin, capex, and discount-rate assumption explicit, DCF is the core method for investment appraisal, capital budgeting, and comparing intrinsic value with market capitalization.

Formula

For a standard free cash flow to the firm (FCFF) DCF with a terminal value:

where is free cash flow in year , is the discount rate (typically WACC), and is the terminal value at the end of year .

Using a Gordon Growth terminal value:

where is the first cash flow in the terminal period and is the long-run growth rate (below the long-term growth of the economy for stability).

To move from enterprise value to equity value and value per share:

Example

Assume a company forecasts unlevered free cash flows (FCFF) of $20m, $22m, and $24m over the next three years.

The weighted average cost of capital $r$ is 10%, and management assumes a conservative perpetual growth rate $g$ of 2% after year 3.

1. Discount the explicit FCFFs:

Year 1: m

Year 2: m

Year 3: m

Present value of explicit period m.

1. Compute terminal value with the Gordon Growth formula using year-4 FCFF m:

Discount back to today: m.

1. Enterprise value is the sum of discounted FCFF and discounted terminal value:

1. If net debt is $40m and there are 100m shares outstanding:

Equity value m, implying an intrinsic value per share of about $2.44.

This structure lets an analyst flex FCFF, WACC, terminal growth, net debt, or share count to see how value creation flows through to enterprise value and equity value per share.

How to Use the Discounted Cash Flow (DCF) Calculator

This DCF calculator lets you project future free cash flows, discount them back to today, and translate the result into an equity value per share. Use it to compare your intrinsic value estimate with the current market price.

Choose the projection mode
- At the top, select either Start + Growth (one starting free cash flow plus a constant annual growth rate) or Detailed (by Year) if you want to input a separate free cash flow figure for each projected year.
Set discount rate and projection horizon
- Enter your annual Discount Rate (%), typically the company’s WACC or required return on equity. Then choose the number of Projection Years (e.g., 5–10) and, in Start + Growth mode, specify the Starting Free Cash Flow (Year 1) and the Annual Growth Rate for the explicit period.
Enter yearly free cash flows or growth and configure terminal value
- - In Detailed (by Year) mode, input the Free Cash Flow by Year row by row.
- Select the Terminal Value Method:
- Gordon Growth uses a constant terminal growth rate:
where $FCF_{n+1}$ is the cash flow one year after the last explicit year, $r$ is the discount rate, and $g$ is the terminal growth rate.
- Exit Multiple applies a valuation multiple (e.g., EV/EBITDA or EV/FCF) to the final year cash flow metric.
- Set the Terminal Growth Rate (for Gordon) or appropriate assumptions for your chosen method.
Add capital structure inputs
- Fill in Net Debt (total debt minus cash and cash equivalents) and Shares Outstanding. Optionally enter the Current Share Price so the tool can classify your valuation as undervalued/overvalued/near fair value based on the DCF equity value per share.
Review outputs and valuation classification
- Check the Results panel for Equity Value per Share, total Equity Value, and Enterprise Value (DCF) along with the PV of Explicit FCF and PV of Terminal Value. Use the “What It Means” summary and, if available, scenario/visualization options to stress-test your assumptions before drawing conclusions.

Frequently Asked Questions

Use a rate that reflects the company’s opportunity cost of capital and risk — typically its weighted average cost of capital (WACC) for enterprise-level DCFs, or a required return on equity if you’re valuing equity directly. Higher risk or more uncertainty usually means a higher discount rate.
Most users project 5–10 years, long enough for cash flows to normalize but not so long that assumptions become pure guesswork. If the business is very stable, a shorter horizon (5 years) is often enough; for high-growth companies, you might extend it to 10 years but gradually fade growth down.
Use Gordon Growth when you can reasonably assume long-term, perpetual growth at a modest rate below the discount rate (e.g., mature or steady businesses). Use an Exit Multiple when you prefer to express terminal value as a valuation multiple (like EV/EBITDA) based on peer comps or market norms, especially for businesses with more uncertain long-run growth.
If the DCF equity value per share is above the current share price, your inputs imply the stock may be undervalued; if it’s below, the stock may be overvalued. Always treat this as a range, not a precise truth — small changes in discount rate, growth, or terminal assumptions can move the valuation significantly.

Methodology & Sources

Bibliography

Aswath Damodaran (n.d.). Discounted Cash Flow Valuation — Stern School of Business, New York University https://pages.stern.nyu.edu/~adamodar/pdfiles/eqnotes/dcfallOld.pdf
Accessed 2025-11-30
Aswath Damodaran (2016). An Introduction to Valuation (Fall 2016): Discounted Cashflow Valuation (DCF) — Stern School of Business, New York University https://people.stern.nyu.edu/adamodar/podcasts/valfall16/valsession1.pdf
Accessed 2025-11-30
Brad Einstein (2025). Discounted Cash Flow (DCF) Formula: What It Is & How to Use It — Harvard Business School Online (HBS Online) https://online.hbs.edu/blog/post/discounted-cash-flow
Accessed 2025-11-30

Discounted Cash Flow (DCF) Valuation Calculator (Multi‑Year)

Results

What It Means

What is Discounted Cash Flow (DCF)?

Formula

Example

How to Use the Discounted Cash Flow (DCF) Calculator

Choose the projection mode

Set discount rate and projection horizon

Enter yearly free cash flows or growth and configure terminal value

Add capital structure inputs

Review outputs and valuation classification

Frequently Asked Questions

Methodology & Sources

Bibliography

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Free Cash Flow (FCF) Calculator

Working Capital Calculator