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Discounted Cash Flow Calculator

Make use of this calculator to compute the discounted cash flow based on FCFF and EPS methods.

DCF Using FCFF

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Net Debt

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Growth And Discount Rate

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Shares And Its Market Value

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DCF using EPS

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Predictable Growth

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Terminal Growth

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Discounted Cash Flow Calculator calculates the discounted present value of future cash flow for a business, stock investment, house purchase, etc. It is more appropriate when future conditions are variable and there is slow terminal growth.

What Does Discounted Cash Flow Means?

"DCF (Discounted Cash Flow) is a method employed to access an investment through the analysis of its expected future cash flow"
The discounted cash flow is used to analyze the desirability of an investment opportunity by considering projected future income. For evaluating the investment opportunities, range from 10% to 20% reflecting the investor’s expected rate of return.

DCF Formula:

The discounted cash flow formula equals the sum of all discounted cash flow from the power of different time periods. \(DCF = \frac{CF_1}{(1+r)^1} + \frac{CF_2}{(1+r)^2} + \frac{CF_3}{(1+r)^3} + \ldots + \frac{CF_n}{(1+r)^n}\) Where:
  • \(CF_1, CF_2, CF_3, \ldots, CF_n\) = Expected cash flows at different time periods e.g: year 1, year 2, …
  • (r) = Discount rate represents the rate of return required by investors or the cost of capital.

How Do You Calculate DCF (Discounted Cash Flow)?

To calculate the discounted cash flow estimate the future cash flow of investors and then discount them back to the present value using the discounted cash flow calculator.

Practical Example:

Consider an investment opportunity in a manufacturing company that projects annual cash flows as follows:
  • Year 1 = $100,000
  • Year 2 = $120,000
  • Year 3 = $150,000

Answer:

Formula: Given a discount rate of 15%, we'll use the discounted cash flow formula: \(DCF = \frac{CF_1}{(1+r)^1} + \frac{CF_2}{(1+r)^2} + \frac{CF_3}{(1+r)^3} + \ldots + \frac{CF_n}{(1+r)^n}\) Substituting the values: \(P V = \frac{$ 100,000}{(1+0.15)^{1}}+\frac{$ 120,000}{(1+0.15)^{2}}+\frac{$ 150,000}{(1+0.15)^{3}}\) \(PV = \frac{$100,000}{1.15} + \frac{$120,000}{(1.15)^2} + \frac{$150,000}{(1.15)^3}\)
  • Year 1 Cash Flow: $100,000 / (1 + 0.15)^1 = $86,956.52
  • Year 2 Cash Flow: $120,000 / (1 + 0.15)^2 = $89,820.69
  • Year 3 Cash Flow: $150,000 / (1 + 0.15)^3 = $98,267.72
\(P V \approx $ 86,956.52 + $ 89,820.69 + $ 98,267.72\) \(P V \approx $ 275,045.93\) The DCF calculator simplifies this process, providing valuable insights to aid in investment decision-making. The present value of the investment opportunity is approximately $275,045.93 indicating a discount rate of 15%.

Steps To Use The Calculator:

  • Select the DCF method
  • Put the values accordingly
  • Press on calculate

Outputs:

  • Growth value
  • Terminal value
  • Total Intrinsic Value
  • Value Of The Firm
  • Value Of The Equity Equal
  • Fair Value Per Share
  • Percentage of overvalued company

Additional Queries:

Is DCF The Same As NPV?

No, yet these two concepts are closely related. DCf evaluates attractiveness based on future income and on the other side, NPV measures the difference between the present value of cash inflow and outflow.

What Is The Growth Stage in DCF Model?

The growth stage refers to the period during which a company experiences rapid expansion in profits, revenues, and market share by typically following the initial establishment phase.
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