Discounted Cash Flow (DCF) Valuation Calculator

A Discounted Cash Flow (DCF) model calculates the true intrinsic value of an investment or company by discounting all future cash flows back to today's present value.

Unlevered Free Cash Flow (FCFF) in Year 1.

Expected annual cash flow growth % during the explicit forecast horizon.

Number of years for explicit cash flow projection (typically 5 to 10 years).

Weighted Average Cost of Capital (WACC) or required rate of return.

Long-term sustainable perpetual growth rate (usually 3% to 4.5% matching GDP growth).

How it works

DCF is the gold standard of fundamental equity valuation used by Warren Buffett and Wall Street analysts. It projects future free cash flows over an explicit forecast window, calculates the perpetual terminal value using the Gordon Growth formula, and discounts everything back using your required discount rate (WACC).

Formula

Enterprise Value = ∑_t=1^{n} (FCF_t / (1 + r)^t) + (TV_n / (1 + r)^n), TV_n = (FCF_n(1 + g) / r - g)

Sums the present discounted value of expected future cash flows plus the discounted perpetual terminal value of the enterprise.

SymbolVariableUnitDescription
FCF_tFree cash flow in year t₹
rDiscount rate (WACC)decimal
gPerpetual terminal growth ratedecimal
TV_nTerminal value at year n (Gordon Growth Model)₹

Worked example

₹10 Lakh FCF growing @ 10% for 5 years (12% WACC, 4% terminal growth)

Year 1 FCF:
₹10,00,000
Growth:
10%
Horizon:
5 years
WACC:
12%
Terminal Growth:
4%

Explicit 5-year PV of cash flows = ₹41.48 Lakhs. Final Year 5 FCF is ₹14.64 Lakhs. Terminal value = (14.64L × 1.04) / (0.12 - 0.04) = ₹1.903 Crore. Discounted to present, Terminal Value PV = ₹1.080 Crore. Total Enterprise Value = ₹41.48L + ₹1.080Cr ≈ ₹1.495 Crore.

Limitations

DCF valuations are highly sensitive to small adjustments in discount rate (WACC) and terminal growth assumptions.

Frequently asked questions

What is WACC in DCF analysis?

WACC stands for Weighted Average Cost of Capital. It represents the blended cost of financing a business through equity and debt, and serves as the hurdle or discount rate in DCF models.

Why is terminal value such a large percentage of DCF valuation?

Because a business is assumed to operate as a going concern in perpetuity, cash flows generated beyond the 5-10 year explicit forecast horizon often account for 60% to 80% of total enterprise value.

What is the difference between Enterprise Value and Equity Value?

Enterprise value reflects the entire operating business. To find equity value (shareholder value), add non-operating cash and subtract total debt from enterprise value.

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Last reviewed: 2026-08-22.