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DCF calculator
Turn your guesses about growth, margins and risk into an estimate of a business’s value today, and see which guess matters most.
Example Estimated value $20.83M
StockEducation Editorial Team · Updated · 15 min read · How we check our tools
The calculator
Estimate what a business is worth
Output Calculated from your inputs
DCF Valuation Tool
Estimate a company’s intrinsic value based on future cash flows
Business Basics
Cash Flow Adjustments
Valuation Parameters
Hypothetical DCF. FCF = EBIT − tax on positive EBIT + depreciation − capital spending − working-capital change. Discount each year’s FCF, then add discounted terminal value: final FCF × (1 + terminal growth) ÷ (discount rate − terminal growth). Equity adds entered cash and subtracts debt. Constant assumptions and optional price comparisons are estimates; warning thresholds do not validate them. Full method and source.
Equity value = enterprise value + excess cash − interest-bearing debt.
Free cash flow = EBIT after tax + depreciation and amortization − capital spending − change in working capital. No immediate tax credit is assumed for an operating loss.
Enterprise Value
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PV of Cash Flows
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Terminal Value (PV)
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DCF Information
Enter your inputs and click Calculate Intrinsic Value to see a personalized valuation insight.
5-Year Projection
10-Year Projection
| Year | Revenue | EBIT | NOPAT | Free Cash Flow | PV of FCF |
|---|---|---|---|---|---|
| Click Calculate to see projections | |||||
Educational DCF estimate: model assumptions and limits
This projects constant revenue growth, EBIT margin, tax, depreciation, capital spending and working-capital percentages over the selected horizon, followed by perpetual terminal growth. Terminal growth must be below the discount rate. No immediate tax credit is assumed on operating losses.
Enterprise value is adjusted only for entered excess cash and interest-bearing debt. It excludes other claims, dilution, off-balance-sheet liabilities, changes in business conditions and detailed tax/accounting rules. Optional price comparisons and warning thresholds are model illustrations, not forecasts, recommendations or validation of your assumptions.
Educational content only. DCF outputs are estimates based on your assumptions. Equity value uses the cash and debt you enter. Other claims, off-balance-sheet liabilities, market sentiment and qualitative factors are not modeled. This tool is not financial advice.
How to use it (three steps)
Enter revenue, growth, margin and the other assumptions, then press Calculate Intrinsic Value. Add shares outstanding to see a value per share, and today’s price to compare. Not sure where to start? Load an example.
- 1Enter revenue, growth, margin and the discount rate, or load an example
- 2Press Calculate Intrinsic Value and read the value per share
- 3Lower the growth rate by two points and see how much the value moves
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What is a DCF and how do you calculate it?
A discounted cash flow (DCF) valuation says a business is worth the cash it will produce in the future, translated into today’s dollars. You project free cash flow for several years, add a terminal value for everything after that, then shrink each future dollar by your required return, the discount rate.1 In the default example, a company with $10 million of revenue growing 10% a year comes out at about $20.8 million. Cut growth to 5% and it falls to $14.4 million: the answer is only as good as the guesses.
Checked against SEC · U.S. Treasury · see sources
- The idea. A business is worth its future cash, in today’s dollars.
- Free cash flow. Profit after tax, plus depreciation, minus spending and working capital.
- Terminal value. Often more than half the total; keep its growth near 2% to 3%.
- Discount rate. Your required return; higher means a lower value.
- Sensitivity. 12% instead of 10% cut the example from $20.83M to $15.91M.
- Use cases. Run cautious, likely and hopeful versions.
The stepsWhich guesses matter mostWhat it leaves outTest yourself
Part 1 of 3 · How it works
How does a DCF calculation work?
A DCF turns a story about a business into a number. Every input is a guess about the future, so treat the result as a range, not a fact.
What are the steps?
- Project revenue for each year using your growth rate.
- Work out free cash flow: operating profit after tax, plus depreciation, minus capital spending and the cash tied up in working capital.
- Add a terminal value for all the years after the projection, assuming slow growth forever.
- Discount every future amount back to today at your discount rate, then add them up.
- Adjust for the balance sheet: add excess cash, subtract debt, and divide by shares for a value per share.
Revenue grows 10% to $11.0 million. A 20% operating margin gives $2.2 million, or $1.74 million after 21% tax. Subtract $550,000 of capital spending and $220,000 of working capital: $968,000 of free cash flow. Discounted over 10 years plus a terminal value, the business comes to about $20.83 million.
What is the discount rate?
The return you require for the risk you take. A dollar in 10 years is worth less than a dollar today, and less still if the business is risky. This calculator discounts cash flow to all capital providers, so the relevant rate is the weighted average cost of capital (WACC). The 8%, 10% and 12% cases on this page are sensitivity examples, not recommended rates.
What is terminal value?
The value of all cash flows after the last projected year, assuming they grow at a slow steady rate forever. It usually makes up more than half the total. In the default it is 57.7%. That is why the long run growth rate should stay at or below the economy’s long term growth, around 2% to 3%.
Why is a dollar in five years worth less than a dollar today?
Because money you have now can be invested, and money promised later carries the risk it never arrives. Discounting reverses compound growth. If you can earn 10% a year, $620.92 today grows to about $1,000 in five years. So $1,000 promised in five years is worth about $620.92 today at a 10% discount rate.
Lower the rate to 8% and the same $1,000 is worth about $680.58 today. Nothing about the cash changed; only the return you demand did. That is the whole engine of a DCF, applied year after year: each future cash flow is divided by (1 + discount rate) raised to the number of years away.
This explains why distant cash matters less than near cash, and why a business whose profits arrive far in the future is so sensitive to the rate you choose. The further away the money, the more the discount bites.
A DCF is cash flow, discounted. Change a guess and the value changes with it.
Part 2 of 3 · Which guesses matter most
How sensitive is a DCF to its assumptions?
Small changes to growth, margin or the discount rate move the answer a lot. Seeing that is the most useful thing a DCF teaches.
How much does each change move the value?
Estimated value of the default business when one assumption changes
How do I use that?
- Run three cases. A cautious one, a likely one and a hopeful one. The spread is the honest answer.
- Check the terminal value share. Above about 75%, most of the value rests on a guess about the far future.
- Ask what the price assumes. Adjust growth until the value matches today’s price, then ask whether that growth is realistic.
Why does the discount rate swing the terminal value so much?
Terminal value divides next year’s cash flow by the gap between the discount rate and the terminal growth rate. Take $1 million of cash flow growing 2.5% forever. At a 10% discount rate the gap is 7.5 points: $1.025 million ÷ 0.075 is about $13.67 million.
Raise the rate to 12% and the gap widens to 9.5 points, giving about $10.79 million. Drop it to 8% and the gap shrinks to 5.5 points, giving about $18.64 million. A four point range in the rate moves the terminal value by nearly $8 million, before any discounting.
The same math is why terminal growth must stay modest. As growth creeps toward the discount rate, the gap approaches zero and the value shoots toward infinity. Damodaran’s rule of thumb is that stable growth should not exceed the economy’s growth, and should not exceed the riskless rate used in the valuation.4
If a small change flips your conclusion, you do not have a conclusion yet.
Part 3 of 3 · What it leaves out
What does this DCF calculator leave out?
The calculator keeps every assumption constant for the whole projection. Real businesses change.
What are the limits?
- One growth rate and one margin for every year. Real companies speed up, slow down and change their margins.
- Your inputs, not company data. Pull revenue, cash, debt and shares from the company’s annual report (Form 10-K).2
- No tax credit for losses and no share dilution, buybacks or acquisitions.
- The undervalued or overvalued label just compares your estimate with the price you entered. It is not a signal to buy or sell.
Check the business behind the numbers. The AI fundamental analysis assistant walks through a real company’s revenue, margins and debt, so your DCF inputs start from something real.
Open the fundamentals assistant Free, no signup.How do I choose a discount rate for my own DCF?
Use a rate consistent with the cash flows. This calculator values cash flow to both lenders and shareholders, so use a weighted average cost of capital (WACC). The cost of equity combines a riskless rate and an equity risk premium; WACC weights that equity cost and the after-tax cost of debt by their market values. The riskless part usually comes from Treasury yields, which the Treasury publishes every business day.5 A long maturity, such as the 10 year, is a common reference for a long valuation. Match the currency and inflation basis of the rate to the projected cash flows.
For the risk part, look at what the market actually demands. Damodaran’s January 2026 estimate of the cost of capital for the total U.S. market was about 6.96%, with riskier industries higher and steadier ones lower.3 His historical return tables show stocks have paid more than Treasury bills over long periods, with large swings from year to year.6
In practice, run the calculator at your chosen rate and at two points either side. If the conclusion survives all three, it is sturdier than a single precise looking number. If it flips between them, the valuation is sensitive to the rate and does not support a firm conclusion about the price.
A DCF is a way to think, not a price target. Test your inputs against the company’s filings.
Mistakes to avoid
Three mistakes to avoid, and what to do instead
Trusting one set of assumptions
Small changes in growth or the discount rate swing the answer a lot. Run a low, middle and high case before you believe any number.
Using a tiny discount rate
A low rate makes almost anything look cheap. The 8%, 10% and 12% rates here are sensitivity examples. Choose a rate consistent with the cash flows, risk, currency and financing mix.
Forgetting the margin of safety
A DCF is an estimate, not a price target. Many investors only buy well below the value they calculate.
Quick check
Three quick questions and one why
1. What does the discount rate represent in a DCF?
2. In the examples, what happens to the value when the discount rate rises from 10% to 12%?
3. Why should terminal growth usually stay around 2% to 3%?
Why: why do two careful analysts get very different DCF values?
Because the answer depends on guesses about growth, margins and risk years into the future. Small differences compound. A DCF shows what you have to believe for a price to make sense, which is often more useful than the number itself.
Common questions
DCF Calculator FAQ
What is a DCF in simple terms?
A DCF, or discounted cash flow, values a business as the cash it will produce in the future, translated into today’s dollars. You estimate free cash flow for several years, add a terminal value for the years after, and shrink each amount by your required return. The result is an estimate of what the whole business is worth now. In this calculator’s default, $10 million of revenue growing 10% a year comes out at about $20.83 million.
How do you calculate free cash flow for a DCF?
Start with operating profit, subtract tax, add back depreciation, then subtract capital spending and any extra cash tied up in working capital. In the default year 1, revenue of $11.0 million at a 20% margin gives $2.2 million of operating profit, or $1.74 million after 21% tax. Taking off $550,000 of capital spending and $220,000 of working capital leaves $968,000. Company figures for each piece are in the annual report on Form 10-K.
What discount rate should I use in a DCF?
Match the rate to the cash flows. This tool estimates cash available to debt and equity investors, so WACC is the relevant discount rate. It combines the cost of equity and after-tax cost of debt using market-value weights. A Treasury yield in the same currency can inform the riskless component; the business and financing mix determine the risk adjustment. The 8% to 12% cases here illustrate sensitivity, rather than prescribing a rate. Damodaran’s January 2026 estimate put the total U.S. market’s cost of capital near 6.96%. Run several rates: in the default, moving from 10% to 12% cuts the value from $20.83 million to $15.91 million.
What is a reasonable terminal growth rate?
The 2% to 3% range on this page is an illustrative assumption, not a universal rule. Choose a sustainable rate consistent with the currency, inflation basis and long-run economy, and keep it below the discount rate. Terminal value assumes the growth lasts forever, and no company can outgrow its economy forever. A rate close to the discount rate also breaks the formula, because the value is divided by the gap between the two. If the terminal value makes up more than about three quarters of your total, test a lower growth rate to see how much of the estimate rests on that one guess.
Why is terminal value such a big part of a DCF?
Because it covers every year after the projection, which for a healthy business is most of its life. In the calculator’s default it is 57.7% of the total value, and shares above half are normal. The risk is that a small change to terminal growth or the discount rate moves the answer a lot. That is why this calculator shows the terminal value share in the result: the higher it is, the more your estimate depends on the far future.
Is a DCF value a price target?
No. It is the output of your assumptions, and changing them changes it. Two careful analysts can reach very different values for the same company because they expect different growth, margins or risk. The undervalued or overvalued label in this calculator only compares your estimate with the price you typed in. A better use is to find what growth the current price implies, then ask whether that growth is realistic for the business.
Does a DCF work for every company?
It works best for companies with steady, positive cash flow and a business you can forecast. For young companies still losing money, the cash flows are mostly guesses, so the value swings wildly. Banks and insurers are harder still, because debt is part of their product and free cash flow is hard to define. Cyclical businesses need care too: project from an average year, not the best or worst one.
What does this DCF calculator leave out?
It uses one growth rate and one margin for every projected year, so it cannot model a company that speeds up, slows down or changes its profitability. It ignores tax credits from past losses, share dilution, buybacks and acquisitions. All figures are your inputs; the calculator fetches no company data. You can save your numbers on this device or copy a link that reopens the calculator with them, which makes it easy to compare cautious and hopeful cases.
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DCF on one card, and where to go next
- Step 1 · DoneHow a DCF works
See it on one card
- The idea. A business is worth its future cash, in today’s dollars.
- Free cash flow. Profit after tax, plus depreciation, minus spending and working capital.
- Terminal value. Often more than half the total; keep its growth near 2% to 3%.
- Discount rate. Your required return; higher means a lower value.
- Sensitivity. 12% instead of 10% cut the example from $20.83M to $15.91M.
- Use cases. Run cautious, likely and hopeful versions.
- 2Step 2 · NowCheck the fundamentals
- 3Step 3Follow the learning pathThe learning pathFree
Learn the rest in the right order
Lessons, videos, tools and quizzes, ordered so each step builds on the last, from market basics to building a portfolio.
Start the learning path
Want the full sequence? See the course outline →
Sources and assumptions
- Aswath Damodaran, NYU Stern: Free cash flow to the firm. How free cash flow is built from operating income, reinvestment and taxes.
- U.S. Securities and Exchange Commission: How to read a Form 10-K. Where to find the company figures a DCF needs.
- Aswath Damodaran, NYU Stern: Cost of equity and capital (US). Cost of capital by industry as of January 2026, a reference point for discount rates.
- Aswath Damodaran, NYU Stern: Terminal value. Why stable growth should not exceed the economy’s growth or the riskless rate.
- U.S. Department of the Treasury: Daily Treasury par yield curve rates. Current Treasury yields, the usual starting point for a riskless rate.
- Aswath Damodaran, NYU Stern: Historical returns on stocks, bonds and bills. Yearly U.S. stock, bond and bill returns since 1928, for context on required returns.
Method: revenue grows at the entered rate each year. Free cash flow = operating profit − tax on positive operating profit + depreciation − capital spending − working capital change. Each year’s free cash flow is discounted at the entered rate; terminal value = final year free cash flow × (1 + terminal growth) ÷ (discount rate − terminal growth), also discounted. Equity value adds excess cash and subtracts debt; value per share divides by shares outstanding. The examples use 1 million shares so the value per share equals the value in millions. Calculator scenarios were checked against this model on October 23, 2026. External benchmarks retain the date of the linked source.
Page history. October 21, 2026: V7 page published with checked projections, exact-value sharing, input validation and responsive controls. October 23, 2026: V11 design and expanded guide applied while retaining the working calculation and saved-input fixes.
StockEducation provides general education, not personal financial, tax or legal advice. Results are illustrations based on the assumptions you enter, not forecasts or promises of any return. Investing involves risk, including the loss of money you invest.
