Discounted Cash Flow Calculator
Determine the intrinsic value of a company or investment using DCF analysis
Calculate DCF Valuation
Projected Free Cash Flows (FCFF)
Weighted Average Cost of Capital
Long-term growth rate (typically 2-3%)
Balance Sheet Information
Share Information
DCF Valuation Results
Valuation Components
Equity Calculation
Investment Analysis
✓ The stock appears to be undervalued by 114.71%
Based on DCF analysis, the intrinsic value ($10.74) exceeds the current market price ($5.00), suggesting potential upside.
Example Calculation
Company Alpha - FCFF Method
Projected FCFF: $90K, $100K, $108K, $116K, $123K
WACC: 9.94%
Perpetual Growth: 4.48%
Cash: $100,000 | Debt: $900,000
Outstanding Shares: 100,000
Calculation Steps
1. PV of FCFF = $410,527
2. Terminal Value = $2,363,047 → PV = $1,463,047
3. Enterprise Value = $1,873,574
4. Net Debt = $800,000
5. Equity Value = $1,073,574
Fair Value per Share = $10.74
vs. Current Price $5.00 = 114.7% Undervalued
Cash Flow Breakdown
| Year | FCFF | PV |
|---|---|---|
| 1 | $90,000.00 | $81,862.83 |
| 2 | $100,000.00 | $82,734.86 |
| 3 | $108,000.00 | $81,274.92 |
| 4 | $116,200.00 | $79,539.56 |
| 5 | $123,490.00 | $76,887.04 |
| Terminal | $2,363,046.74 | $1,471,274.30 |
Key Assumptions
DCF Analysis Tips
DCF is sensitive to assumptions - small changes can greatly affect valuation
Use conservative growth rates for more reliable valuations
Best suited for mature companies with predictable cash flows
Cross-reference DCF with other valuation methods
Consider creating multiple scenarios (best/worst case)
Understanding Discounted Cash Flow (DCF)
What is DCF Valuation?
Discounted Cash Flow (DCF) is a valuation method that determines the fair value of an investment by analyzing its expected future cash flows and discounting them to present value using an appropriate discount rate (typically WACC).
Two DCF Methods
- •FCFF Method: Uses Free Cash Flow to Firm, discounted by WACC
- •EPS Method: Uses Earnings Per Share with growth projections
- •Both methods should arrive at similar valuations if assumptions are consistent
DCF Formula (FCFF Method)
Firm Value = Σ [FCFF / (1 + WACC)^t] + TV
- FCFF: Free Cash Flow to Firm
- WACC: Weighted Average Cost of Capital
- t: Time period (years)
- TV: Terminal Value (perpetual cash flows)
Key Insight: DCF values a company based on its ability to generate future cash, not just current earnings or book value.
Terminal Value Calculation
Terminal value represents all future cash flows beyond the projection period and typically accounts for 60-80% of the total firm value:
TV = FCFF × (1 + g) / (WACC - g)
where g = perpetual growth rate (typically 2-3%)
When to Use DCF
✓ Good for DCF
- • Mature, stable companies
- • Predictable cash flows
- • Low dividend payout ratio (<20%)
- • Transparent financial reporting
✗ Not Ideal for DCF
- • High-growth startups
- • Cyclical industries
- • Negative cash flows
- • Companies paying high dividends