Finance and accounting
Discounted cash flow (DCF) valuation calculator
Simple DCF valuation: discount forecast free cash flows and a Gordon-growth terminal value to enterprise value, equity value and value per share.
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One value per year, starting with year 1.
Long-run growth after the forecast; must be below the discount rate.
Debt minus cash; deducted to reach equity value.
Result
Method and limits
Enterprise value is the present value of the forecast free cash flows plus the present value of a terminal value that assumes constant growth after the last forecast year.
EV = Σ_{t=1..n} FCF_t / (1 + r)^t + TV / (1 + r)^n
TV = FCF_n × (1 + g) / (r − g) Equity value = EV − net debtAssumptions and limits
- End-of-year discounting with a constant discount rate.
- The terminal value often makes up most of the value; test several growth and discount rates.
- Free cash flows should be to the firm (before interest) when discounting at WACC.
- An educational calculation, not financial, tax, legal or investment advice.
Worked example
Free cash flows of 100, 110 and 121 at 10% with 2% terminal growth: each forecast year is worth 90.91 today (272.73 in total), the terminal value is 1,542.75 and its present value 1,159.09, so the enterprise value is 1,431.82.
References
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