WACC Calculator
Free WACC calculator. Compute weighted average cost of capital from cost of equity, cost of debt, capital structure, and tax rate. Essential for DCF valuation.
DCF Valuation Calculator
Free discounted cash flow (DCF) valuation calculator. Project 5-10 years of free cash flow, calculate terminal value, and discount to present value using WACC.
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Should be < WACC, typically 2-3%
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Enterprise Value (DCF)
$227,928,009.00
PV of Projected FCFs⧉
$57,245,750.00
25.1% of total
PV of Terminal Value⧉
$170,682,258.00
74.9% of total
Terminal Value (undiscounted)⧉
$274,885,484.00
Value Composition
FCFs 25%
Terminal 75%
Projected Free Cash Flows
| Year | FCF | Present Value | Cumulative PV |
|---|---|---|---|
| 1 | $11,500,000.00 | $10,454,545.00 | $10,454,545.00 |
| 2 | $13,225,000.00 | $10,929,752.00 | $21,384,297.00 |
| 3 | $15,208,750.00 | $11,426,559.00 | $32,810,856.00 |
| 4 | $17,490,062.00 | $11,945,948.00 | $44,756,804.00 |
| 5 | $20,113,572.00 | $12,488,946.00 | $57,245,750.00 |
Sensitivity Analysis (WACC vs Growth Rate)
| WACC \\ Growth | 10% | 12.5% | 15% | 17.5% | 20% |
|---|---|---|---|---|---|
| 8% | $257,117,906.00 | $285,170,772.00 | $315,716,746.00 | $348,921,838.00 | $384,959,333.00 |
| 9% | $216,452,946.00 | $239,716,586.00 | $265,030,814.00 | $292,531,599.00 | $322,360,851.00 |
| 10% | $186,666,667.00 | $206,433,293.00 | $227,928,008.00 | $251,264,911.00 | $276,563,076.00 |
| 11% | $163,918,099.00 | $181,023,220.00 | $199,611,500.00 | $219,780,454.00 | $241,631,837.00 |
| 12% | $145,983,597.00 | $160,998,343.00 | $177,304,322.00 | $194,986,071.00 | $214,131,790.00 |
DCF valuations are sensitive to assumptions. Always present a range and cross-check with other methods.
Planning notes, formulas, and examples
About the DCF Valuation Calculator
The Discounted Cash Flow (DCF) model is a standard intrinsic-valuation framework. It estimates what a business may be worth by projecting future free cash flows and discounting them back to today's dollars using a required return such as weighted average cost of capital (WACC).
Unlike revenue multiples or comparable analysis, DCF is grounded in projected cash generation. It forces you to make explicit assumptions about growth, margins, and risk, which makes it useful for understanding what is driving the valuation rather than simply quoting a market multiple.
This calculator implements a full DCF with a customizable projection period, Gordon Growth terminal value, and per-year cash flow table. It projects free cash flows, discounts them using the user-entered rate, adds terminal value, and presents the result as an enterprise-value estimate rather than a market quote or negotiated transaction price.
When This Page Helps
DCF is the most defensible valuation method for any cash-flow-generating business. Investment bankers, private equity firms, and sophisticated investors rely on DCF models. By building your own, you understand exactly what assumptions drive the valuation and can stress-test each one. This transparency makes DCF the preferred method for investor presentations, M&A negotiations, and internal capital allocation decisions.
How to Use the Inputs
- Enter the current year's free cash flow (FCF).
- Set the growth rate for the projection period.
- Enter WACC (discount rate) — use our WACC calculator if needed.
- Set the terminal growth rate (typically 2-3%, not exceeding GDP growth).
- Choose projection years (5, 7, or 10).
- View total enterprise value breakdown: PV of FCFs + terminal value.
Formula used
DCF = Σ [FCFₜ / (1 + WACC)ᵗ] + Terminal Value / (1 + WACC)ⁿ
Terminal Value = FCFₙ₊₁ / (WACC − g)
Where FCFₜ = projected free cash flow in year t, WACC = discount rate, g = terminal growth rate, n = projection yearsExample Calculation
Result: Enterprise Value: ~$228M
Year 1-5 FCFs grow at 15%: about $11.5M, $13.2M, $15.2M, $17.5M, and $20.1M. Terminal value = $20.1M × 1.025 / (0.10 − 0.025) ≈ $274.9M. PV of projected FCFs is about $57.2M and PV of terminal value is about $170.7M, for a total enterprise value near $227.9M. Terminal value still represents roughly three quarters of the result.
Tips & Best Practices
- Terminal growth rate should NOT exceed long-term GDP growth (2-3%). Higher rates produce unrealistically high valuations.
- If terminal value is >80% of total, your projection period may be too short or assumptions too aggressive.
- Run sensitivity analysis on WACC (±1-2%) and growth rate (±5%) to see the valuation range.
- Use unlevered FCF (before debt payments) for enterprise value, then subtract net debt for equity value.
- DCF works best for stable, cash-generating businesses. For pre-revenue startups, use other methods.
- Always cross-check DCF with revenue multiples and comparable transactions.
The Terminal Value Problem
Terminal value often represents 60-80% of a DCF valuation, which makes many analysts uncomfortable. To mitigate: extend the projection period, ensure terminal growth is conservative (2-3%), and cross-check with an exit multiple method (TV = final year EBITDA × industry multiple).
Sensitivity Analysis
Always run a sensitivity table varying WACC (rows) and growth rate (columns). A robust DCF produces a range of values, not a point estimate. If the range is too wide, your assumptions need more research.
Common DCF Mistakes
(1) Terminal growth > GDP growth, (2) Using revenue instead of free cash flow, (3) Not adjusting for working capital changes, (4) Forgetting to subtract net debt from enterprise value to get equity value, (5) Being overly optimistic on margins in outer years.
Sources & Methodology
Last updated:
Methodology
This worksheet starts with current free cash flow, grows it at the user-entered rate for the selected projection period, discounts each projected year by the user-entered discount rate, and then adds a Gordon Growth terminal value discounted back to present value. The result is presented as enterprise value because the page works from unlevered cash-flow assumptions rather than directly valuing common equity.
The sensitivity table reruns the same structure across a small range of discount-rate and growth assumptions. This is a scenario model, not a claim about market price. Small changes in growth, margin, reinvestment, or discount-rate assumptions can move the output materially.
Sources
- Glossary: Free Cash Flow (Investor.gov) — SEC investor-education glossary entry defining free cash flow.
- Glossary: Valuation (Investor.gov) — SEC investor-education glossary entry on valuation as an estimate of what an asset or company is worth.
Frequently Asked Questions
Use the Weighted Average Cost of Capital (WACC). For most mid-cap companies, this ranges 8-12%. Higher-risk companies (startups, emerging markets) may use 15-25%. The discount rate should reflect the riskiness of the cash flows being projected.
Terminal value captures all cash flows beyond the projection period in a single number. It assumes the business continues growing at a steady, modest rate forever. The Gordon Growth Model: TV = Final Year FCF × (1 + g) / (WACC − g). It typically represents 60-80% of total DCF value.
DCF is only as accurate as its inputs. Small changes in WACC or growth rate cause large valuation swings. Its value lies in making assumptions explicit and testable. Always present a range (base, bull, bear case) rather than a single number.
Typically 5-10 years. Use 5 years for stable, slow-growth businesses. Use 7-10 years for high-growth companies that need time to reach steady state. Beyond 10 years, individual year projections become unreliable — let terminal value handle the rest.
They answer different questions. DCF estimates intrinsic value based on fundamentals. Multiples estimate relative value based on what the market pays for similar companies. Best practice: use both and compare. If they diverge significantly, investigate why.
Free Cash Flow = Operating Cash Flow − Capital Expenditures. It represents cash available to all capital providers (debt and equity). For DCF, use unlevered FCF (before interest payments) to calculate enterprise value, then subtract debt to get equity value.
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