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Discounted Cash Flow (DCF) Valuation Calculator

Forecast annual free cash flows, a discount rate and a terminal growth rate, then compute the enterprise value via discounting.

Input Data

Discount Rate
%
Terminal Growth
%
Cf1
HK$
Cf2
HK$
Cf3
HK$
Cf4
HK$
Cf5
HK$

Results

Sum of PV cash flows and PV terminal value.
HK$1,206.61
Present value of the forecasted cash flows.
HK$248.69
Present value of the terminal (Gordon) value.
HK$957.93

At a glance:DCF values a firm by discounting forecast free cash flows and adding a terminal value. PV(FCF_t) = FCF_t/(1+r)^t; terminal value TV = FCF_last x (1+g)/(r-g) with g < r; EV = sum PV(FCF) + PV(TV). TV usually dominates (example ~79% of value). Example: 3y of 100k, r=10%, g=2% → EV ≈ 1.21m, TV PV ≈ 958k (~79%). WARNING: Highly assumption-sensitive; g must be < r; garbage-in-garbage-out; terminal value dominates, so stress-test g and r; pair with multiples. Education, not advice.

Formula

EV = Σ Cᵢ/(1+r)^i (i = 1..n) + TV/(1+r)^n.

Terminal value TV = Cₙ × (1+g)/(r − g), with r > g.

PV of terminal value = TV/(1+r)^n.

How to Use

  1. Enter forecast free cash flows for years 1-5 (0 to end early).
  2. Enter the discount rate (WACC/required return).
  3. Enter a terminal growth rate below the discount rate.
  4. View EV, PV of cash flows and PV of terminal value.

FAQ

What is DCF and the key formulas?

DCF discounts forecast future free cash flows (FCF) to today and adds a terminal value (TV). PV(FCF_t) = FCF_t/(1+r)^t; TV = FCF_last x (1+g)/(r-g) (Gordon growth, g < r); EV = sum of PV(FCF) + TV/(1+r)^n. TV usually dominates the value (often 60%-80%).

Why is the terminal value so important?

Because most of a firm's value comes from cash flows beyond the explicit forecast (the going concern). In the example, TV PV is ~79% of EV — small errors in g or r cascade into huge value swings. That is why you must sanity-check the terminal assumptions and run sensitivity.

How do I choose the discount rate and g?

Discount rate: usually WACC (blend of equity and debt cost, see the WACC calculator), or a required return reflecting risk. g: a perpetual growth rate, must be below r and ideally below long-term GDP/nominal growth (e.g. 2%-3%) — setting g near r explodes TV. Use conservative, defensible values and stress-test.

Is DCF reliable, and what are its limits?

DCF is rigorous but 'garbage in, garbage out' — it hinges on forecasts, r and g. Errors compound, and TV dominates, so a small assumption change swings value a lot. It is best paired with comparables/multiples (P/E, EV/EBITDA) and scenario analysis. Treat the output as a range, not a point.

How should Hong Kong / growth companies use DCF?

HK-listed and growth firms often have volatile or negative near-term FCF, making DCF hard but still useful for long-horizon valuation. Tips: forecast on a reasonable base (normalised FCF), keep horizon long enough for maturity, keep g conservative and below r, and show scenarios (bull/base/bear). Note HK market pricing also leans on comparables and dividends; DCF should complement, not replace, multiples. For listed names, cross-check with the market-cap and dividend-discount calculators. Education, not advice.

Related Tools

References

Content review: Calculatorism Finance Team. Results are for reference only; please refer to the relevant authorities for the official figures.

Found a problem with the results?

If this calculator's result is wrong, or you have any question about the calculation logic, please let us know. You are viewing:Discounted Cash Flow (DCF) Valuation Calculator（/finance/dcf）。