Discounted cash flow (DCF) calculator
Project ten years of free cash flow, add a terminal value and discount it all back to today. The interesting part is not the number that comes out, but how much that number moves when you change the discount rate by half a point: that is what the grid below shows.
The starting values are an example and are deliberately invented, with round figures so the arithmetic can be redone by hand. They are not data from any real company.
What happens if you are wrong
Value per share for each combination. The highlighted cell is yours.
Rows: discount rate. Columns: perpetual growth.
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The formula
EV = Σ FCFₜ ÷ (1+WACC)ᵗ + VT ÷ (1+WACC)¹⁰
How it is calculated
You project free cash flow year by year, bring each one back to today's money by dividing by (1 + WACC) raised to the number of years, and add a terminal value that captures everything after the last projected year. The terminal comes from the Gordon formula: the following year's cash flow divided by (WACC − g), and that result has to be discounted back to today too.
What comes out is the enterprise value. To get to the value per share you subtract net debt and divide by the share count. If the company has more cash than debt, net debt is negative and therefore adds.
A worked example
With free cash flow of €100M next year growing at 5 %, a WACC of 9 % and perpetual growth of 2 %: the first five discounted years add up to about €430M. The terminal value, taking year-6 cash flow divided by 9 % − 2 %, comes to €1,860M, and discounted back to today leaves about €1,210M. Total: roughly €1,640M of enterprise value.
Look at the split: the terminal value is 74 % of the total. The DCF is mostly telling you what you believe about year six onwards — not about the five years you projected in detail. That percentage appears above as «weight of terminal value» precisely for that reason, and when it goes above 80 % the result deserves suspicion.
Why a single number is useless
Half a point of WACC either way moves the value per share by between 9 % and 16 %, and the closer the discount rate and perpetual growth are to each other, the more brutal the effect. A DCF that returns «€47.32 per share» is claiming a precision it does not have.
What informs is the range. That is why the grid shows twenty-five valuations at once instead of one: if the range between reasonable scenarios is narrow, the conclusion holds; if it runs from double to half, the honest answer is that the method does not conclude for that company.
Frequently asked questions
How do you calculate the intrinsic value of a share?
With a discounted cash flow: project free cash flow for the coming years, discount each one back to today by dividing by (1 + WACC) raised to the number of years, add a terminal value using the Gordon formula, and sum it all. That gives enterprise value; subtracting net debt and dividing by shares outstanding gives the value per share. The result depends entirely on the assumptions, so you work with a range rather than a figure.
What is terminal value and why does it weigh so much?
It is the value of everything the company generates after the last projected year, condensed into one figure: the following year's cash flow divided by (WACC − perpetual growth). It weighs so much —typically between 70 % and 80 % of the total— because it captures an infinite horizon against ten projected years. If perpetual growth equals or exceeds the discount rate, terminal value becomes infinite and the formula stops making sense.
Is a DCF reliable?
As a model, yes; as a prediction, no. A DCF is correct arithmetic over uncertain assumptions, and its result inherits that uncertainty: half a point of WACC moves the value per share by between 9 % and 16 %. Used to produce an exact figure it misleads; used to see which assumptions a valuation is sensitive to, and what would have to be true to justify today's price, it is very useful.
Other calculators
WACC Calculator · P/E Ratio Calculator: reported vs adjusted
Do it on a real company
Celsmar computes this from the accounts companies file with their regulator, and shows which line every figure comes from. Free to start, no card.
A calculation tool for informational purposes. It is not financial advice nor a recommendation to buy or sell, and its result depends entirely on the assumptions you enter.