Simple Discounted Cash Flow (DCF) Calculator

What is a simplified DCF?

A discounted cash flow (DCF) values a business by asking one question: how much is all the cash it will produce in the future worth today? Money later is worth less than money now, so each future year of cash is shrunk ("discounted") at a rate that reflects risk. The simplified version needs only a handful of inputs: today's free cash flow, one growth rate for ten years, a discount rate (WACC) and a terminal growth rate for the years after that.

When do you use it?

Use it for a quick first valuation, an interview case, or when you only have a cash flow figure and no full accounts. Analysts use the same logic to test whether a share price or an M&A offer looks cheap, and private equity teams run a rough DCF next to their LBO.

How to read the output

Enterprise value is the value of the whole business, before deducting debt. Equity value is what is left for shareholders after net debt, and value per share divides that by the number of shares. Compare value per share with the share price or offer price. The split between PV of FCF years 1–10 and PV of terminal value tells you where the value comes from. With the built-in example (free cash flow of 100, 8% growth, 9% WACC, 2% terminal growth), value per share is €17.80 and the terminal value is about 58% of enterprise value. Shares of 50–75% are normal; above 80% means the answer rests almost entirely on what happens after year 10.

The sensitivity table shows value per share for WACC one point lower and higher (rows) against terminal growth one point lower and higher (columns). The highlighted centre cell is your case. In the example the range runs from about €13 to €26: read it as "what I'd believe if I'm a bit wrong", not as one precise answer.

Common mistakes

• Terminal growth too high. Growing forever faster than the economy (above roughly 3%) is not realistic.
• WACC close to terminal growth. The terminal value formula divides by WACC minus growth; a small gap makes the value explode. The calculator refuses a WACC at or below terminal growth.
• Using levered cash flow. The input should be cash flow before any interest or debt repayment, because net debt is subtracted separately.
• Mixing units. Free cash flow, net debt and shares must all be in the same unit (all millions or all thousands), or the per-share value will be off by a factor of 1,000.

Limitations

One constant growth rate for ten years is a strong simplification: real companies grow fast, then slow down. There are no separate margins, capex or working capital, no mid-year discounting and no adjustment for leases or pensions. For a more detailed build, use the full DCF.

FAQ

What discount rate should I use?

The company's WACC, typically 7–11% for an established business. The WACC calculator can estimate it.

Why is the terminal value so large?

Because it covers every year after year 10, forever. That is normal, which is exactly why you should test it in the sensitivity table.

Can value per share be negative?

Yes, if net debt is larger than enterprise value. In practice it means the shares are worth little on your assumptions.

Is this the "right" value?

No single number is. The answer is only as good as your assumptions.

Educational use only. Not financial advice. Exact formulas: see the Methodology page