Our Discounted Cash Flow Calculator helps you assess the intrinsic value of stocks by calculating the present value of expected future cash flows.

This tool is essential for making informed investment decisions, allowing you to determine whether a stock is undervalued or overvalued. Use it to guide your long-term investment strategy and optimize portfolio management.

DCF Calculator for Stock Valuation

Discounted Cash Flow Calculator

ⓘ Enter the expected cash flow for the first year.
ⓘ Enter the expected cash flow for the second year.
ⓘ Enter the expected cash flow for the third year.
ⓘ Enter the expected cash flow for the fourth year.
ⓘ Enter the expected cash flow for the fifth year.
ⓘ Enter the discount rate.
ⓘ Enter the number of the company's outstanding shares.
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Show additional input options
ⓘ Enter the terminal value of the company.
ⓘ Enter the growth rate for the terminal value.

How the Dicounted Cash Flow Calculator Works

The Discounted Cash Flow calculator helps you estimate the intrinsic value of a stock by considering expected future cash flows. It discounts those cash flows back to the present using a discount rate, providing investors with an informed basis for investment decisions.

By inputting projected cash flows and the discount rate, you can calculate the fair price of a stock based on its future financial performance.

Calculating DCF: Formula and Explanation

The DCF formula discounts future cash flows to present value using the following equation:

\( DCF = \sum \left( \frac{CF_t}{(1 + r)^t} \right) + \frac{TV}{(1 + r)^n}
\)

Where:

  •  \(CF_t\): Cash flow in year t
  •  \(r\): Discount rate (in decimal)
  •  \(t\): Time period in years
  •  \(TV\): Terminal Value (company’s value after the forecast period)
  •  \(n\): Number of forecast years

The terminal value represents the value of the company beyond the forecasted years and is discounted just like the cash flows. Adjustments can be made based on expected growth rates.

Application Areas and Use Cases

The DCF calculator is primarily used in stock valuation, especially for companies with predictable cash flows. Investors use the DCF model to determine a stock’s “fair” price and make informed investment decisions.

It is particularly useful for long-term investments where future cash flows play a critical role in valuing the company.

Using DCF for Long-Term Financial Planning

The Discounted Cash Flow (DCF) model is a valuable tool in strategic financial planning, helping businesses and investors project long-term value.

By estimating future cash flows and discounting them to their present value, companies can assess the feasibility of long-term projects, investments, or business expansions. This method provides insights into how current financial decisions will impact future performance and profitability, making it a cornerstone of strategic planning.

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