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Miraç Özdemir
Business Valuation & Corporate Finance

DCF Business Valuation Calculator (Discounted Cash Flow)

Calculates enterprise value, equity value and value per share with the discounted cash flow (DCF) method from a 5-year free cash flow forecast, WACC and a terminal growth rate.

Version 1

Things to keep in mind:

  • DCF results are very sensitive to assumptions; a 1-point change in WACC or terminal growth can change the value significantly.
  • Cash flows and WACC must use the same currency: discount TRY flows at a TRY WACC and USD flows at a USD WACC.
  • Minority interests, associates, non-operating assets and lease liabilities must be added to net debt separately.
  • This tool is not a valuation report or investment advice and does not replace a licensed valuation.

Calculator

Free cash flow forecast (FCFF)

TRY

Free cash flow to the firm next year; may be negative.

TRY

Estimated free cash flow to the firm for year 2 (TRY). Cash flows are assumed to arrive at year end. It can be negative; base your forecasts on one consistent set of assumptions.

TRY

Estimated free cash flow to the firm for year 3 (TRY). It is assumed to arrive at year end and is discounted by the WACC for 3 years. A negative value is allowed.

TRY

Estimated free cash flow to the firm for year 4 (TRY). It is assumed to arrive at year end and is discounted by the WACC for 4 years. A negative value is allowed.

TRY

The terminal value is derived from this year's flow; enter a normalised value.

Discounting and growth

Annual discount rate; you can calculate it with the WACC tool.

Annual growth of cash flows after year 5; must be below WACC.

Equity bridge

TRY

Financial debt − cash and equivalents; enter a negative value for net cash.

Shares outstanding for the value per share (optional).

After the first calculation, the result updates automatically when you change a value.

Result

Enter the values and press Calculate to see the result here.

About this tool

The discounted cash flow (DCF) method defines a company's value as the present value of the free cash flows it will generate. Free cash flows to the firm (FCFF) for the explicit forecast period (here 5 years) are discounted at the weighted average cost of capital (WACC), and a terminal value based on constant growth is added for the years after year 5.

Formulas

  • Present value of the explicit period = Σ FCFₜ / (1 + WACC)ᵗ, t = 1…5
  • Terminal value (Gordon) = FCF₅ × (1 + g) / (WACC − g)
  • Present value of the terminal value = Terminal value / (1 + WACC)⁵
  • Enterprise value = PV of the explicit period + PV of the terminal value
  • Equity value = Enterprise value − Net debt (financial debt − cash)
  • Value per share = Equity value / Number of shares

Example: with free cash flow starting at 100 million TRY and growing 10% a year, a WACC of 10% and terminal growth of 3%, the explicit period is worth 454.5 million TRY today, the terminal value is 2,154.3 million TRY and its present value 1,337.7 million TRY. Enterprise value is 1,792.2 million TRY; about 75% of it comes from the terminal value. With net debt of 292.2 million TRY and 100 million shares, equity value is 1,500 million TRY and the value per share 15 TRY.

How to read the result: a DCF value is an estimate and is very sensitive to WACC and terminal growth: when the terminal value's share is high, a small change in a rate moves the value a lot. Try several scenarios and compare with valuation multiples. Terminal growth should not exceed long-run nominal economic growth and must be below WACC.

How to use

  1. Enter the free cash flow to the firm (FCFF) forecast for the next 5 years (you can derive it with the Free Cash Flow tool).
  2. Enter WACC and the perpetual growth rate after year 5 (with the same currency and inflation assumption).
  3. For equity value enter net debt (financial debt − cash; negative for net cash) and the number of shares.
  4. Press Calculate and try different scenarios.

Notes

Cash flows are assumed to arrive at year end (no mid-year convention). Amounts are rounded to the cent, value per share to 4 decimals and the ratio to 2 decimals (HALF_UP). If terminal growth is equal to or above WACC, the Gordon formula is undefined; the terminal value is taken as 0 and the result covers only the 5-year explicit period. Without a share count the value per share shows 0.

Sources

Frequently asked questions

5 questions

  1. Future free cash flows are discounted to today at WACC, a terminal value is added for the years after the forecast period, and net debt is deducted from the resulting enterprise value to reach equity value.

Next step

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