Discounted Cash Flow Calculator guide
A company DCF discounts forecast free cash flow and a continuing terminal value. Cash is added and debt subtracted to move from enterprise to equity value.
Terminal value often represents most of the estimate, making small assumption changes highly consequential.
How to use the discounted cash flow calculator
- Enter current amounts: Use current, documented values from the same relevant period.
- Enter assumptions: Use realistic rates, percentages, periods, and costs where applicable.
- Review the full result: Review the primary estimate together with its supporting measures.
- Stress-test risk: Model less favorable timing, value, cost, or rate assumptions.
Formula and variables
The estimate applies the entered values and assumptions to the stated formula.
Enterprise value = PV of forecast cash flows + PV of terminal value- Inputs — Entered values
- The amounts, percentages, or periods supplied to the calculator.
- Result — Calculated output
- The estimate produced by applying the formula to the entered values.
Worked example: discounted cash flow calculator
A user enters a representative set of values and assumptions.
- Key inputs
- Amounts, percentages, periods, and costs
- Apply the stated formula.
- Include all relevant entered values and constraints.
- Compare the result with an alternative scenario.
Result: Estimated enterprise value, equity value, and per-share value.
Use the estimate as a planning input and verify important decisions with current records or qualified guidance.
Understanding your results
Primary estimate
Estimated enterprise value, equity value, and per-share value.
Risk measures
Use supporting payment, leverage, cost, and cash figures together.
Assumptions
- Entered rates and costs remain constant.
- Payments and cash flows occur on schedule.
Limitations
- Taxes, legal terms, accounting treatment, and transaction-specific costs may differ.
- Future values, timing, and rates are uncertain.
Common mistakes
- Reviewing only the headline result.
- Ignoring relevant costs, timing, or supporting measures.
- Using optimistic timing or value assumptions.
- Treating an estimate as a guaranteed outcome.
Practical use cases
Compare scenarios consistently
Change one assumption at a time or enter each alternative using the same basis.
Plan cash requirements
Estimate funds needed before committing.
Planning and decision guide
Stress-test the assumptions
Use multiple scenarios for cash flow, margins, reinvestment, and discount rate.
Review the important risks
Keep terminal growth below discount rate and economically sustainable.
Verify the source values
Treat the output as a valuation range, not a price forecast.
Frequently asked questions
What is terminal value?
Estimated value of cash flows beyond the explicit forecast period.
Why add cash and subtract debt?
That converts enterprise value to an equity-value estimate.
What discount rate should I use?
A rate consistent with the risk and capital claims of the cash flow being discounted.
Why is DCF sensitive?
Long-duration cash flows and terminal value respond strongly to rate and growth changes.
Sources and review
- Introduction to investing — U.S. Securities and Exchange Commission. Accessed 2026-07-10.
Reviewed 2026-07-10.