DCF Calculator — Easy DCF Calculation & Valuation Guide

DCF Calculator — DCF Calculation Formula & Step-by-Step Valuation Guide

Our DCF Calculator and guide explain the DCF calculation formula, show how to calculate DCF by hand or in Excel, cover terminal value methods, and answer whether a DCF calculates enterprise value. This content is SEO-optimized for queries like how to calculate DCF and dcf valuation calculator.

What is DCF and why use a DCF Calculator?

Discounted Cash Flow (DCF) is a valuation method that estimates the present value of future cash flows. A DCF Calculator speeds up the process by letting you input forecasted free cash flows, a discount rate, and terminal value assumptions to compute intrinsic value quickly.

DCF Calculation Formula (Core)

Use this standard present value formula for DCF:

PV = Σ (FCFt / (1 + r)t)  +  TV / (1 + r)n

Where:

  • PV = Present value (intrinsic value)
  • FCFt = Free cash flow in year t
  • r = Discount rate (typically WACC for firm valuation)
  • TV = Terminal value at the end of the forecast period
  • n = Last forecast year

How to Calculate Terminal Value in DCF

Terminal value captures the value beyond the explicit forecast horizon. Two common approaches:

1. Gordon Growth / Perpetuity Growth Method

TV = FCFn × (1 + g) / (r − g)

Where g is the perpetual growth rate and r is the discount rate. Use conservative g (GDP or inflation + productivity), typically 1–3% for developed markets.

2. Exit Multiple Method

TV = Financial Metricn × Exit Multiple (e.g., EBITDA multiple)

Choose an appropriate multiple based on comparable company analysis. Exit multiples are market-driven and should be justified in your assumptions.

How to Calculate a DCF — Step-by-Step

  1. Project free cash flows (FCF) for a reasonable explicit forecast period (usually 5–10 years).
  2. Choose a discount rate (WACC for firm-level DCF; cost of equity for equity-level DCF).
  3. Calculate present value of each forecasted FCF: FCFt / (1 + r)t.
  4. Estimate terminal value using Perpetuity Growth or Exit Multiple, then discount it to present value.
  5. Sum discounted FCFs + discounted terminal value = Enterprise Value (for firm-level DCF).
  6. If you calculated enterprise value, convert to equity value: Equity Value = Enterprise Value − Net Debt (Debt − Cash).

How to Calculate DCF in Excel

Excel makes DCF straightforward. Example steps:

  1. Column A: Year (1, 2, 3... n).
  2. Column B: Forecasted FCF for each year.
  3. Choose a discount rate r (single cell).
  4. Column C: Discount factor = (1 + r)^t.
  5. Column D: Present value of FCF = B / C.
  6. Terminal value (cell): either formula for perpetuity or exit multiple formula.
  7. Discount terminal value: = TV / (1 + r)^n.
  8. Sum discounted FCFs and discounted TV: =SUM(D1:Dn) + Discounted_TV.

Use Excel functions like NPV() carefully — NPV assumes cash flows start at period 1; manual discounting is often clearer for mixed timing.

Does DCF Calculate Enterprise Value?

Yes — a firm-level DCF ordinarily produces an Enterprise Value (EV) by discounting unlevered free cash flows using WACC. To get equity value from EV, subtract net debt (Debt − Cash) and add non-operating assets if applicable. If you discount levered free cash flows using cost of equity, the DCF will directly estimate equity value.

DCF Valuation Calculator — Short Example

Assumptions:

  • Forecast FCFs (Year 1–5): $2.0M, $2.3M, $2.6M, $2.9M, $3.2M
  • Discount rate (WACC): 9%
  • Terminal growth rate (g): 2%

Terminal value (Gordon Growth):

TV = FCF5 × (1 + g) / (r − g)
   = 3.2M × 1.02 / (0.09 − 0.02)
   = 3.264M / 0.07 = 46.63M (approx)

Discount FCFs and TV to present value and sum = Enterprise Value. This is exactly what a dcf valuation calculator automates for you.

Frequently Asked Questions (FAQ)

What is the DCF calculation formula?

The DCF formula sums discounted future free cash flows and a discounted terminal value: PV = Σ (FCFt / (1 + r)t) + TV / (1 + r)n.

How do I calculate terminal value in DCF?

Use either the Gordon Growth method (TV = FCFn × (1 + g) / (r − g)) or the Exit Multiple method (TV = metric × multiple).

How to calculate DCF in Excel?

Project FCFs, discount each cash flow manually (or with NPV adjusted for timing), compute terminal value, discount it, and sum everything. See step-by-step section above.

Does DCF calculate enterprise value or equity value?

A firm-level DCF (using unlevered FCF and WACC) typically produces enterprise value. Convert to equity value by subtracting net debt. Using levered FCF and cost of equity yields equity value directly.