DCF Calculator — FCFF, Terminal Value & Equity Value
Value a business by forecasting free cash flow, discounting at WACC, adding a Gordon-growth terminal value, and bridging enterprise value to equity.
Discounted Cash Flow (DCF) Calculator
A clear path from inputs to results.
For founders, investors, and analysts who want a ground-up estimate of what a business is worth. It forecasts unlevered free cash flow (FCFF) from revenue and margin assumptions, discounts it at your WACC, adds a Gordon-growth terminal value, and bridges enterprise value to equity value with net debt. Use it to test whether an asking price or a market valuation is actually supported by your operating forecast.
How to use
- Enter the starting revenue and the annual revenue growth rate; each forecast year grows on top of the last, with year-1 revenue equal to starting revenue times (1 + growth).
- Set the operating drivers: EBIT margin, tax rate, D&A as a percent of revenue, capex as a percent of revenue, and the net working capital investment as a percent of revenue.
- Choose the WACC, the terminal growth rate (kept below WACC), and the explicit forecast length (3 to 12 years).
- Enter net debt to bridge enterprise value down to equity value.
- Read enterprise value, equity value, and the split between the discounted explicit FCFF and the discounted terminal value; the charts trace FCFF and the cumulative value build-up year by year.
- Scan the 3D sensitivity surface, which revalues enterprise value across discount rates from 5% to 15% and terminal growth rates from 0% to 6%.
The formula
Reference: Standard corporate-finance treatment as in Brealey, Myers, and Allen, Principles of Corporate Finance (valuing a business by discounted cash flow); Gordon-growth terminal value after Gordon and Shapiro (1956).
Worked example
Five-year FCFF forecast with a stable asset base
- Starting revenue 1,000,000; revenue growth 10% per year; EBIT margin 20%; tax rate 25%; D&A 5% of revenue; capex 5% of revenue (so they offset); net working capital investment 0%; WACC 10%; terminal growth 0%; forecast 5 years; net debt 475,000.
- 1
Year-t revenue is 1,000,000 x 1.1^t, EBIT is 20% of it, and NOPAT keeps 75% after the 25% tax, so NOPAT is 150,000 x 1.1^t. D&A and capex cancel and working capital does not move, so FCFF equals NOPAT: 165,000; 181,500; 199,650; 219,615; and 241,576.50 in years 1 through 5. Each flow discounted at 10% is worth exactly 150,000 today, so the explicit forecast contributes 750,000. The terminal value is FCFF_5 / (0.10 - 0.00) = 2,415,765, worth 2,415,765 / 1.1^5 = 1,500,000 today. Enterprise value is 750,000 + 1,500,000 = 2,250,000, and equity value is 2,250,000 - 475,000 = 1,775,000.
Enterprise value 2,250,000; equity value 1,775,000; the terminal value contributes 66.7% of enterprise value.
Interpreting the result
Equity value is the DCF estimate of what the owners claim is worth if the forecasts hold; compare it with the asking price or market capitalization rather than treating it as a fact. Watch the split between explicit-period value and terminal value: the more the terminal value dominates, the more the answer is a statement about WACC and terminal growth than about operations. The sensitivity surface shows exactly how enterprise value moves with those two inputs, which is the honest way to present a DCF range.
Assumptions & limitations
- D&A, capex, and net working capital scale linearly with revenue at the percentages you set, and margins and growth are constant over the explicit horizon.
- Cash flows arrive at year-end and are discounted with full-year exponents; no mid-year convention.
- The terminal value assumes Gordon growth forever at a rate g strictly below WACC, with FCFF in year n+1 equal to FCFF in year n times (1 + g).
- FCFF is unlevered: interest expense, debt paydown, and refinancing live in the net-debt bridge, not in the forecast.
- A flat corporate tax rate is applied to EBIT; loss carryforwards, tax credits, and stock-based-compensation adjustments are not modeled.
Frequently asked questions
Why does the terminal value dominate my valuation?
With an explicit forecast of only 3 to 12 years, most of the cash flows a going concern will ever produce sit beyond the final year, and the Gordon formula capitalizes all of them into one number. In the worked example the terminal value is two-thirds of enterprise value, which is normal for short horizons. It means WACC and terminal growth deserve at least as much scrutiny as the operating forecast, and the sensitivity surface makes that dependence visible.
Why discount FCFF rather than net income?
FCFF is the cash the operations generate before any financing choices, so discounting it at WACC values the whole firm independently of how it is financed. Net income already subtracts interest expense and belongs only to equity holders, so it pairs with a cost-of-equity discount rate instead. Keeping the two separate avoids double-counting the effect of debt.
What discount rate should I use for the WACC input?
WACC is the blend of your after-tax cost of debt and your cost of equity, weighted by the target capital structure. The cost-of-equity leg is commonly estimated with CAPM, so your risk-free rate, equity risk premium, and beta assumptions flow directly into this input. It is an assumption you must justify, not an output the model produces.
What happens if terminal growth exceeds WACC?
The Gordon formula divides by WACC minus g, so a terminal growth rate at or above the discount rate produces an infinite or negative value and the model stops being meaningful. Terminal growth must stay below the discount rate, and economically it should not exceed long-run nominal growth of the economy. If your defensible g is that close to WACC, extend the explicit forecast instead of stretching g.
How do I get from equity value to a per-share estimate?
Subtract net debt, which is total debt minus cash and other non-operating assets, from enterprise value — that is the equity value this calculator reports — then divide by the diluted share count you care about. The tool stops at aggregate equity value because share counts, options, and dilution live outside the operating forecast.
Why does it matter that D&A and capex offset each other?
In a steady state, depreciation approximates the capital spending needed to maintain the asset base, so the add-back and the subtraction roughly cancel and FCFF collapses to NOPAT, which makes the forecast easy to audit. Persistent gaps between the two imply a growing or shrinking asset base, and your revenue growth assumption should be consistent with whichever story you are telling.
Methodology last reviewed 2026-10-06. Results are informational and not financial or engineering advice — see our disclaimer.