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DCF Calculator
Build a discounted cash flow model in 2 minutes. Get intrinsic value, margin of safety, and a sensitivity table showing exactly how your assumptions drive the outcome. Used by investors and business leaders to cut through market noise.
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Enter free cash flow to get started. Or load a real company example above — see how different assumptions change the conclusion.
Quick start: Alphabet (GOOGL)
FCF: $69B · Growth: 12% · Discount: 9% · Shares: 12.3B → Intrinsic ≈ $185/share
How to use this DCF calculator
Find free cash flow
Free cash flow = operating cash flow − capital expenditures. Both are on the cash flow statement in any 10-Q or 10-K. Use trailing twelve months (TTM). If FCF has been lumpy, use a 3-year average.
Set a realistic growth rate
Anchor to recent 3–5 year FCF growth, then apply a 20–30% discount for conservatism. Use the "Load example" presets (AAPL, GOOGL, MSFT) to see how reasonable assumptions look for large-cap companies.
Choose your discount rate
8–10% for large-cap US equities. 11–13% for smaller or riskier businesses. This is your required return — the minimum you'd accept to own this business instead of a risk-free alternative.
Read the sensitivity table, not the point estimate
Any single DCF number is a point estimate with false precision. The table matters: if the stock looks cheap across multiple growth/discount combinations, your thesis is robust. If it only works under optimistic assumptions, that's a warning.
The DCF model explained
What is a DCF model?
A DCF (discounted cash flow) model answers one question: what should you pay today for all the cash a business will generate in the future? You estimate future free cash flows, then discount them back to today using a required rate of return. The result is intrinsic value — what the business is actually worth, independent of what the market currently says.
The model has three inputs that matter most: how fast the business grows (growth rate), how long that growth lasts (projection period), and what you demand for holding the risk (discount rate). Small changes in these assumptions create large changes in intrinsic value — which is exactly why the sensitivity table is more useful than any single output number.
How to choose your growth rate
Use the company's recent 3–5 year revenue or FCF growth as your base. Then ask: is this sustainable? High-growth rates (20%+) rarely persist for more than 5–7 years. The law of large numbers works against every growing business eventually.
A conservative approach: use the recent rate for years 1–3, then step it down by 30–50% for years 4–5. For the terminal growth rate (after year 5), use 2–3% — roughly in line with long-run nominal GDP growth. Using anything above 4% assumes the company will eventually be larger than the entire global economy. That's not a model — it's wishful thinking.
What discount rate should you use?
The discount rate is your required return — the minimum you'd accept to own this business instead of something risk-free. For most publicly traded US companies, 8–12% is the reasonable range. Use 9–10% as a starting point for large-cap, stable businesses.
Apply a higher rate (11–13%) for smaller, more volatile, or capital-intensive companies. The 10-year Treasury yield (~4.5%) plus a 4–5% equity risk premium gives a rough WACC approximation. But don't obsess over getting WACC precisely right — use the sensitivity table to understand how your conclusion holds across a range of discount rates.
Why terminal value dominates the result
In a typical 5-year DCF, terminal value represents 65–75% of total intrinsic value. This is mathematically unavoidable: you're capturing all cash flows from year 6 to infinity. The terminal value equation — FCF × (1 + g) / (r − g) — is extremely sensitive to the spread between your discount rate and terminal growth rate.
When r − g shrinks (say discount rate drops or terminal growth rises), terminal value explodes upward. This is why Warren Buffett and Charlie Munger don't use precise DCF models. They look for businesses that are obviously cheap across a wide range of assumptions — what Munger called "no-brainer" investments. The sensitivity table forces the same discipline.
Margin of safety: the most important output
Margin of safety is the gap between intrinsic value and current market price. Benjamin Graham introduced the concept in The Intelligent Investor: even if your DCF assumptions are directionally correct, you need a buffer against estimation error. Graham required a 33–50% margin of safety. Modern practitioners use 20–30% as a minimum.
Think of it this way: if your DCF says a stock is worth $100 and you buy it at $80 (20% margin), you're protected against being 20% wrong in your assumptions and still not losing money. The margin of safety bar in this calculator shows exactly where you stand — and calls out when you'd need to be precisely right to break even.
When DCF works — and when it doesn't
DCF works best for mature businesses with predictable, positive free cash flow: consumer staples, industrials, software companies with established revenue, utilities. Apple is the classic example — stable FCF, predictable growth, easy to model.
DCF works poorly for: pre-revenue companies (nothing to discount), banks and insurers (capital is a product, not an expense), turnarounds with negative FCF, and hyper-growth companies where the terminal value assumption does virtually all the work. For these, use relative valuation (EV/EBITDA, P/S, P/B) instead — or combine both methods and triangulate.
Frequently asked questions
What is the DCF formula?
Intrinsic Value = Σ [FCFₜ / (1 + r)ᵗ] + Terminal Value / (1 + r)ⁿ. FCFₜ is free cash flow in year t, r is your discount rate, n is the projection period. Terminal Value = FCF_final × (1 + g) / (r − g), where g is the long-run growth rate.
Where do I find free cash flow?
On the cash flow statement: Operating Cash Flow minus Capital Expenditures. Both are in the company's 10-K (annual) or 10-Q (quarterly) filing. Use trailing twelve months (TTM) for the most current number.
Why does my intrinsic value change so much when I adjust the discount rate?
The DCF formula uses (1 + r)ᵗ in the denominator — a small change in r compounds across 5+ years and the terminal value calculation. A 1% increase in discount rate can reduce intrinsic value by 10–20%. This is why the sensitivity table matters more than any single estimate.
What is a good margin of safety?
Most value investors target 20–30%. Benjamin Graham required 33–50%. The right margin depends on how confident you are in your assumptions — less predictable businesses warrant a wider buffer.
What shares outstanding should I enter?
Use diluted shares outstanding — this includes options, warrants, and convertible securities. Find it in the earnings release or the 10-K cover page. It's usually in millions (M) or billions (B) for large companies.
Can I use this calculator for any stock?
For any stock with positive, relatively predictable free cash flow: yes. It works best for mature companies. For banks, pre-revenue companies, and businesses with negative FCF, DCF is less reliable — use P/B or EV/EBITDA instead.
What is WACC?
Weighted Average Cost of Capital — the blended required return across all capital sources (debt and equity). For most equity-only analyses, WACC approximates your equity required return: 10-year Treasury yield (~4.5%) plus an equity risk premium of 4–5% = roughly 8.5–9.5%.
Why is the terminal value such a large percentage of total value?
Because it captures all cash flows from year 6 to infinity. In a 5-year DCF, terminal value typically represents 65–75% of total intrinsic value. This is mathematically normal — it's not a problem with the model. It does mean your terminal growth rate assumption is extremely important.