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Finance • Valuation • DCF • NPV • Terminal Value

Discounted Cash Flow Calculator (DCF)

Use this Discounted Cash Flow Calculator to estimate the present value of future cash flows, terminal value, enterprise value, and net present value. Enter projected cash flows, a discount rate, optional initial investment, and a terminal value method to build a simple DCF valuation.

Present valueDiscount each cash flow with \(PV=\frac{CF_t}{(1+r)^t}\).
Terminal valueEstimate \(TV=\frac{CF_{n+1}}{r-g}\) with perpetual growth.
NPV decisionCalculate \(NPV=\sum PV-I_0\).

Enter DCF assumptions

DCF valuation mode selected.
Enter annual cash flows separated by commas. The calculator discounts each cash flow using \(PV_t=\frac{CF_t}{(1+r)^t}\).

Enter one cash flow per year, separated by commas. Example: 10000, 12000, 14000.

Equity value estimate \(=\) enterprise value \(-\) net debt. Use negative value for net cash.

This DCF calculator is for educational valuation estimates. Real investment decisions require deeper due diligence, scenario testing, tax treatment, capital structure analysis, and risk review.

Results

Enter values and calculate.
DCF enterprise value
$228,781.52
Net present value \(NPV\)
$178,781.52
Terminal value present value
$175,479.69
Equity value estimate
$228,781.52

Discounted cash flow formula

Discounted cash flow, or DCF, is a valuation method that estimates what future cash flows are worth today. The core idea is that money received in the future is worth less than money received today because of risk, inflation, opportunity cost, and the time value of money. The present value of a future cash flow is:

\[ PV_t=\frac{CF_t}{(1+r)^t} \]

Where \(PV_t\) is the present value of the cash flow in year \(t\), \(CF_t\) is the cash flow received in year \(t\), \(r\) is the discount rate written as a decimal, and \(t\) is the year number. A full DCF valuation sums the present values of projected cash flows:

\[ DCF=\sum_{t=1}^{n}\frac{CF_t}{(1+r)^t} \]

If an initial investment is included, net present value is:

\[ NPV=\sum_{t=1}^{n}\frac{CF_t}{(1+r)^t}-I_0 \]

When a terminal value is included, the DCF formula becomes:

\[ DCF=\sum_{t=1}^{n}\frac{CF_t}{(1+r)^t}+\frac{TV_n}{(1+r)^n} \]

The calculator above applies these formulas and shows how each cash flow contributes to the final valuation.

How to use the DCF Calculator

  1. Enter projected cash flows. Type the expected annual free cash flows separated by commas, such as \(10000, 12000, 14000\).
  2. Enter the discount rate. This rate should reflect the required return, risk, or cost of capital. The calculator converts the percentage into decimal form.
  3. Enter the initial investment. Use this field to calculate net present value. If you only want enterprise value from future cash flows, enter \(0\).
  4. Choose a terminal value method. You can use no terminal value, the perpetual growth method, or a manual terminal value.
  5. Enter net debt if needed. The calculator estimates equity value by subtracting net debt from enterprise value.
  6. Click Calculate DCF. The calculator shows enterprise value, NPV, terminal value present value, equity value, and step-by-step formulas.

DCF is useful for business valuation, project analysis, startup financial modeling, investment comparison, private company valuation, stock analysis, real estate cash flow modeling, and finance education. The key is not only calculating the number but also understanding how sensitive the result is to assumptions.

What is discounted cash flow?

Discounted cash flow is a method for valuing an asset based on expected future cash flows. Instead of focusing only on current price, accounting profit, or recent sales, DCF asks: “What are the future cash flows worth today?” This makes DCF one of the most important frameworks in corporate finance and investment analysis.

The method is based on the time value of money. A cash flow of \(10{,}000\) received today is not equivalent to \(10{,}000\) received five years from now. The future amount must be discounted to reflect the required return and risk. The higher the discount rate, the lower the present value of future cash flows.

For example, a cash flow of \(10{,}000\) received one year from now and discounted at \(10\%\) has a present value of:

\[ PV=\frac{10{,}000}{1.10}=9{,}090.91 \]

The same \(10{,}000\) received five years from now is worth:

\[ PV=\frac{10{,}000}{(1.10)^5}=6{,}209.21 \]

This demonstrates why timing matters. The farther away a cash flow is, the more heavily it is discounted.

Worked DCF example

Suppose a business is expected to generate these annual cash flows:

\[ CF_1=10{,}000,\quad CF_2=12{,}000,\quad CF_3=14{,}000,\quad CF_4=16{,}000,\quad CF_5=18{,}000 \]

Assume the discount rate is \(10\%\), so \(r=0.10\). The present value of each cash flow is:

\[ PV_1=\frac{10{,}000}{(1.10)^1}=9{,}090.91 \]
\[ PV_2=\frac{12{,}000}{(1.10)^2}=9{,}917.36 \]
\[ PV_3=\frac{14{,}000}{(1.10)^3}=10{,}518.41 \]
\[ PV_4=\frac{16{,}000}{(1.10)^4}=10{,}928.31 \]
\[ PV_5=\frac{18{,}000}{(1.10)^5}=11{,}176.45 \]

The total present value of explicit cash flows is approximately:

\[ 9{,}090.91+9{,}917.36+10{,}518.41+10{,}928.31+11{,}176.45=51{,}631.44 \]

If a terminal value is added, the total DCF value may be much higher because the terminal value represents cash flows beyond the explicit forecast period.

Terminal value in DCF

Terminal value estimates the value of cash flows after the explicit forecast period. Since most businesses are expected to continue beyond five or ten forecast years, terminal value often represents a large part of a DCF valuation. The perpetual growth method is one common approach:

\[ TV_n=\frac{CF_{n+1}}{r-g} \]

Where \(TV_n\) is the terminal value at the end of year \(n\), \(CF_{n+1}\) is the cash flow expected in the first year after the forecast period, \(r\) is the discount rate, and \(g\) is the perpetual growth rate.

If the final forecast cash flow is \(18{,}000\), the perpetual growth rate is \(3\%\), and the discount rate is \(10\%\), then:

\[ CF_{n+1}=18{,}000(1.03)=18{,}540 \]
\[ TV_5=\frac{18{,}540}{0.10-0.03}=264{,}857.14 \]

That terminal value is still a future value at the end of year \(5\), so it must be discounted back to today:

\[ PV(TV)=\frac{TV_5}{(1+r)^5} \]

Terminal value is powerful, but it is also sensitive. Small changes in \(r\) or \(g\) can materially change the final valuation.

Discount rate and required return

The discount rate is one of the most important assumptions in a DCF model. It converts future cash flows into present values. A higher discount rate lowers the present value because it implies higher risk, higher opportunity cost, or a higher required return. A lower discount rate increases the present value.

In company valuation, the discount rate is often based on the weighted average cost of capital, or WACC. In project analysis, it may be a required hurdle rate. In personal investment analysis, it may represent the return an investor requires to accept the risk.

The discount factor for year \(t\) is:

\[ \text{Discount Factor}_t=\frac{1}{(1+r)^t} \]

The present value is then:

\[ PV_t=CF_t\times \text{Discount Factor}_t \]

For \(r=10\%\) and \(t=3\), the discount factor is:

\[ \frac{1}{(1.10)^3}=0.7513 \]

This means a year-three cash flow is multiplied by about \(0.7513\) to estimate its present value.

DCF, NPV, enterprise value, and equity value

DCF value and NPV are related but not identical in every use case. The present value of future operating cash flows often represents enterprise value before debt adjustments. If an initial investment is subtracted, the result is net present value:

\[ NPV=DCF-I_0 \]

If \(NPV>0\), the project may create value under the selected assumptions. If \(NPV<0\), the project may destroy value under those assumptions. If \(NPV=0\), the project approximately earns the required return.

For company valuation, a simplified equity value estimate is:

\[ \text{Equity Value}=\text{Enterprise Value}-\text{Net Debt} \]

Net debt is usually total debt minus cash and cash equivalents. If a company has more cash than debt, net debt may be negative, which increases equity value when subtracted.

DCF sensitivity and assumptions

A DCF model is only as useful as its assumptions. The most sensitive assumptions are usually the discount rate, perpetual growth rate, terminal value method, and cash flow forecast. A small change in one assumption can produce a large change in value.

For example, in the perpetual growth method:

\[ TV_n=\frac{CF_{n+1}}{r-g} \]

If \(r-g\) becomes smaller, terminal value rises sharply. This is why the perpetual growth rate \(g\) must be chosen carefully. In many models, \(g\) should not exceed the long-term growth rate of the broader economy because a company cannot realistically outgrow the entire economy forever.

A careful analyst usually tests multiple cases: conservative, base, and optimistic. This calculator gives one valuation from the assumptions entered, but a proper DCF process should compare several scenarios.

Common DCF mistakes

  • Using profit instead of free cash flow. DCF is usually based on cash flow, not accounting profit alone.
  • Choosing an unrealistic terminal growth rate. A high perpetual growth rate can overstate value dramatically.
  • Using a discount rate that does not match the cash flow. Riskier cash flows require a higher discount rate.
  • Forgetting to discount terminal value. Terminal value is calculated at the end of the forecast period and must be brought back to present value.
  • Mixing nominal and real values. If cash flows include inflation, the discount rate should also be nominal.
  • Ignoring net debt. Enterprise value and equity value are not the same if debt or cash exists.
  • Treating DCF as exact. DCF is a model, not a certainty. The result depends heavily on assumptions.

DCF formula summary table

Calculation Formula Use it when
Present value of one cash flow \(PV_t=\frac{CF_t}{(1+r)^t}\) You want today’s value of one future cash flow.
DCF value \(DCF=\sum_{t=1}^{n}\frac{CF_t}{(1+r)^t}\) You want the present value of forecast cash flows.
NPV \(NPV=DCF-I_0\) You want value after subtracting the initial investment.
Perpetual growth terminal value \(TV_n=\frac{CF_{n+1}}{r-g}\) You want to estimate value beyond the forecast period.
Present value of terminal value \(PV(TV)=\frac{TV_n}{(1+r)^n}\) You want to bring terminal value back to today.
Equity value \(\text{Equity Value}=\text{Enterprise Value}-\text{Net Debt}\) You want a simplified equity value after debt adjustment.

Related calculators and study tools

DCF valuation connects naturally to net present value, present value, CAGR, compound interest, and annualized return. These related tools can help users continue learning finance and valuation on NUM8ERS.

Present Value Calculator CAGR Calculator Compound Interest Calculator

Update these internal links if your final NUM8ERS URL structure uses different calculator paths.

Discounted Cash Flow Calculator FAQs

What is a DCF calculator?

A DCF calculator estimates the present value of future cash flows by discounting each cash flow back to today using a selected discount rate.

What is the DCF formula?

The basic formula is \(DCF=\sum_{t=1}^{n}\frac{CF_t}{(1+r)^t}\). If terminal value is included, add \(\frac{TV_n}{(1+r)^n}\).

What discount rate should I use?

The discount rate should reflect the required return, risk, or cost of capital. For company valuation, analysts often use WACC as a starting point.

What is terminal value in DCF?

Terminal value estimates the value of cash flows after the explicit forecast period. A common formula is \(TV_n=\frac{CF_{n+1}}{r-g}\).

Is DCF the same as NPV?

Not exactly. DCF usually refers to the present value of future cash flows. NPV subtracts the initial investment: \(NPV=DCF-I_0\).

Why is DCF sensitive to assumptions?

DCF depends heavily on projected cash flows, discount rate, terminal growth rate, and terminal value. Small changes in these inputs can significantly change valuation.