DCF calculator
What a business is worth today from the cash it will produce, in two stages.
Fill it from a company
Illustrative inputs
Most recent year: cash from operations less capital spending. Filed.
Yearly growth through the forecast. Your estimate: no filing states it.
Length of the explicit forecast. Your choice; five is a convention.
Growth forever after the forecast. Your estimate, and it must sit below the discount rate.
The return you require, often a WACC. Your estimate.
Debt less cash, from the balance sheet. Negative when cash is larger. Filed.
Value per share
31.55
Equity of 15,775.57 over 500 shares.
- 73% of this value is the terminal value: it rests mostly on perpetual growth and the discount rate.
Show the working
| Year | Cash flow | Factor | Present value |
|---|---|---|---|
| Year 1 | 1,060 | 0.92 | 972.48 |
| Year 2 | 1,123.6 | 0.84 | 945.71 |
| Year 3 | 1,191.02 | 0.77 | 919.68 |
| Year 4 | 1,262.48 | 0.71 | 894.37 |
| Year 5 | 1,338.23 | 0.65 | 869.75 |
| Forecast, discounted and summed | 4,602 | ||
| Step | Value |
|---|---|
| Forecast, discounted | 4,602 |
| Terminal value at the end of the forecast | 19,499.86 |
| Terminal value, discounted | 12,673.57 |
| The business, before debt | 17,275.57 |
| Share of it that is terminal | 73.36% |
| Less net debt | 15,775.57 |
| Value per share | 31.55 |
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How it works
Value = sum of FCF(t) / (1 + r)^t + TV / (1 + r)^N
- Each forecast year grows free cash flow at g and discounts it at r.
- TV = final-year cash x (1 + g2) / (r - g2), which needs r above g2.
- Filed: free cash flow, shares, net debt. Yours: growth, years, perpetual growth, discount rate.
Reading the result
Dark bars are the forecast years at present value and the grey bar is the terminal value, all on one scale. Their sum, less net debt, divided by the shares is the value per share.
On the illustrative inputs the terminal value is 73.36% of the total, so two assumptions produce most of the answer.
Questions
Why is most of the value in the terminal value?
Everything after the forecast is folded into one figure. Over a five-year forecast that tail usually outweighs the years you forecast, so perpetual growth and the discount rate carry most of the answer.
Where does the discount rate come from?
It is the return you require, often a weighted average cost of capital. The WACC calculator builds one from five inputs, and its cost of equity is still an estimate.
Why does it print n/a?
It refuses when the discount rate is not above perpetual growth, or when free cash flow is not positive. Either case would print a number that looks like a value and is not one.
Is this the same model the workbench uses?
Yes. This page runs the same two-stage engine as the paid workbench, so the same inputs give the same value in both.
What this leaves out
- One growth rate for the whole forecast, where real forecasts fade.
- Preference shares, minority interests and pension deficits are not deducted.
- A precise answer from rough assumptions is still rough.
Next step
The same model run backwards: instead of your growth rate producing a value, a price produces the growth rate somebody is paying for.
The arithmetic runs in your browser, so the numbers you type never leave it. A ticker in the address is read on this site to look the company up, and goes nowhere else. Disclaimer.