DCF Calculator
Estimate the intrinsic value of an investment using Discounted Cash Flow (DCF) analysis. Enter projected free cash flows, a discount rate, and a terminal growth rate to calculate the present value of expected future earnings.
DCF Calculator
Enter projected free cash flows separated by commas, one per year.
FAQ
What is Discounted Cash Flow (DCF) analysis?
DCF analysis is a valuation method that estimates the value of an investment based on its expected future cash flows. It discounts these cash flows back to their present value using a discount rate, then adds a terminal value to account for cash flows beyond the projection period.
What is the terminal growth rate?
The terminal growth rate is the assumed perpetual growth rate of free cash flows beyond the explicit forecast period. It is typically set at or below the long-term GDP growth rate (2-3%) and must be lower than the discount rate for the model to work.
How accurate is DCF analysis?
DCF accuracy depends heavily on the quality of cash flow projections, the chosen discount rate, and the terminal growth rate. Small changes in assumptions can significantly impact the result. It is best used alongside other valuation methods such as comparable company analysis.