Corporate finance
Discounted Cash Flow (DCF) Valuation Calculator
Estimate enterprise value from forecast free cash flows and a Gordon Growth terminal value.
Results
Enter values and press Calculate to see an explanation.
Result interpretation
Enterprise value combines the present value of forecast FCF and terminal value. Without net-debt and share adjustments, it is neither equity value nor a per-share price.
Read the learning guide →FORMULA
Formula
Enterprise value sums discounted forecast FCF and the present value of terminal value. Terminal value grows final-year FCF by (1+g), requiring WACC greater than g.
FCF, WACC, and the forecast period
FCF is cash available to capital providers after operations and needed investment. Here it is unlevered firm FCF. WACC is an annual cost-of-capital discount rate that can draw on cost of equity (often estimated using CAPM) and cost of debt. Enter a percentage; the formula uses a decimal. All FCF occurs at year end.
Terminal value and Gordon Growth
Terminal value represents cash flows after the explicit forecast. Multiply final-year FCF by (1+g) to estimate next-year FCF, divide by WACC−g for value at forecast end, then discount to today. g is a sustainable long-run assumption, not a short-term high-growth rate; WACC must strictly exceed g.
When to use it and limitations
Use it to connect a firm's FCF forecast with its cost of capital and inspect terminal-value dependence. Results are sensitive to FCF, WACC, and g, especially when terminal value dominates. This tool omits net debt, cash, shares, per-share valuation, and a WACC-by-growth sensitivity table. NPV handles general project cash flows; Present Value explains single-payment discounting.
WORKED EXAMPLE
Example
- Enter FCF of 100, 110, and 120 for years 1–3, WACC of 10%, and terminal growth of 2%.
- Discount each forecast flow by 1.1, 1.1², and 1.1³; together they are worth about 271.98 today.
- Grow final-year FCF to 122.4, divide by the 8% WACC-growth spread for a 1,530 terminal value, then discount it and add forecast PV for about 1,421.49 EV.
Frequently asked questions
Why can terminal value dominate a DCF?
The explicit forecast covers only a finite period; terminal value represents all later cash flows. A high share makes the result especially sensitive to long-run growth and WACC.
Why must WACC exceed terminal growth?
The Gordon Growth formula divides by WACC−g. A zero or negative spread does not produce a meaningful finite terminal value.
Is this a stock price target?
No. This estimates enterprise value only. Equity and per-share values require items such as net debt, cash adjustments, and shares outstanding.