Business calculator

Free business valuation (dcf) calculator

Enter your free cash flows, WACC, and terminal growth rate — this business valuation DCF calculator discounts future cash flows and adds a Gordon Growth terminal value to estimate enterprise value, updated live, as you type.

InputsLive
Compounding
Initial principal
$
Monthly contribution
$/mo
Annual interest rate
%
Years
yrs
Result
Future value
$37,405
Interest: $15,405 · Invested: $22,000
Future value$37,405
Interest earned$15,405
Total invested$22,000
Growth factor1.7×

Hypothetical projection. Excludes taxes, inflation, and fees. Actual investment returns vary.

Results are estimates. Consult a professional.

How it's calculated

How the DCF business valuation calculator works

Discounted Cash Flow (DCF) valuation answers a simple question: what is a stream of future cash flows worth in today's dollars? The calculator projects free cash flow (FCF) over an explicit forecast period, discounts each year's FCF back to the present using the Weighted Average Cost of Capital (WACC), then estimates all cash flows beyond the forecast horizon as a Terminal Value using the Gordon Growth Model. The two components sum to Enterprise Value — the total economic value of the business.

Enterprise Value (EV) = Σ [ FCF_t ÷ (1 + WACC)^t ] + Terminal Value ÷ (1 + WACC)^n
Terminal Value (Gordon Growth) = FCF_n × (1 + g) ÷ (WACC g)
WACC = weight of equity × cost of equity + weight of debt × cost of debt × (1 tax rate)
Condition: WACC must exceed g, or terminal value is undefined (division by zero or negative)

DCF is highly sensitive to two inputs: WACC and terminal growth rate (g). A 1% change in WACC can shift enterprise value by 15–30% for a typical small business. The terminal growth rate should not exceed the long-run nominal GDP growth rate (~2.5–3% for U.S. businesses), because a company cannot grow faster than the overall economy indefinitely without becoming the entire economy.

Damodaran Online — NYU Stern School of Business, valuation data and methodologies.
Example

Worked example: $200k FCF growing 5%/yr at 10% WACC

Example: $200,000 Year-1 FCF / 5% growth / 10% WACC / 2.5% terminal growth

A profitable regional distribution business generates $200,000 in free cash flow in Year 1, growing at 5% per year over a 5-year explicit forecast. The owner uses a 10% WACC (reflecting private-company risk) and a 2.5% terminal growth rate (matching long-run inflation). What is the estimated enterprise value?

Year 1: $200,000 ÷ 1.10¹ = $181,818
Year 2: $210,000 ÷ 1.10² = $173,554
Year 3: $220,500 ÷ 1.10³ = $165,665
Year 4: $231,525 ÷ 1.10⁴ = $158,137
Year 5: $243,101 ÷ 1.10⁵ = $150,948
Sum of explicit FCF PVs = $830,122
Terminal Value = $243,101 × 1.025 ÷ (0.10 0.025) = $3,322,384
PV of Terminal Value = $3,322,384 ÷ 1.6105 = $2,062,596
Enterprise Value ≈ $830,122 + $2,062,596 ≈ $2,892,718
~$2.9M
A business generating $200,000 FCF in Year 1 (growing 5%/yr) is worth approximately $2.9M under DCF at a 10% WACC and 2.5% terminal growth rate.
Quick reference

DCF enterprise values by FCF and WACC

All figures below assume 5-year explicit FCF period with 5% annual FCF growth, followed by Gordon Growth terminal value at 2.5% perpetuity growth. Enterprise values scale linearly with Year-1 FCF. Small changes in WACC produce large swings in value — which is why WACC sensitivity analysis is essential for any serious business valuation.

Year-1 FCFWACC 8%WACC 10%WACC 12%
$100,000~$2.0M~$1.4M~$1.1M
$250,000~$5.0M~$3.6M~$2.8M
$500,000~$9.9M~$7.2M~$5.7M

Source: Calculator-s.cloud DCF model; Damodaran valuation methodology. Assumes 5-year projection, 5% FCF growth, 2.5% terminal growth.

Practical tips

Tips for DCF business valuation

DCF is only as reliable as its inputs. The model's greatest strength — discounting future cash flows at a risk-adjusted rate — is also its greatest weakness: small assumption errors compound dramatically over the forecast horizon. Professional appraisers typically cross-check DCF output against comparable company multiples (EV/EBITDA, Price/Revenue) to catch implausible results.

  • Use free cash flow, not net income — Free cash flow (net income + depreciation − capex − change in working capital) is what a business actually generates in distributable cash. Net income includes non-cash items and ignores reinvestment needs, making it a misleading valuation input.
  • Set WACC realistically for private companies — Public-company WACCs typically fall 8–12%. Private businesses add an illiquidity premium of 2–5%, pushing the effective WACC to 10–17%. Using a public-company WACC for a private business will overstate value significantly.
  • Keep terminal growth at or below 2.5% — Terminal growth above long-run GDP (~2.5–3%) implies the company will eventually outgrow the entire economy. Conservative DCF models use 2–2.5%. A 0.5% increase in g can raise enterprise value by 15–20%.
  • Run a sensitivity table — Value the business across a grid of WACC (±2%) and terminal growth (±1%) assumptions. The range of outputs shows you the valuation's inherent uncertainty and prevents false precision.
  • Cross-check with market multiples — Compare your DCF output to industry EV/EBITDA multiples (typically 3–8× for small businesses; 6–15× for SaaS). If DCF gives $5M but comparable transactions trade at 4× EBITDA = $2M, investigate the discrepancy before relying on either figure.
Accuracy & limits

Accuracy and limitations

DCF valuation is a framework for structured thinking about value — not a precise answer. The terminal value typically represents 60–80% of the total calculated enterprise value, meaning the vast majority of the result is driven by two assumptions (WACC and terminal growth) that are inherently uncertain. This model uses a simplified Gordon Growth terminal value and does not account for two-stage or three-stage growth models, mid-year discounting conventions, net debt adjustments to get from enterprise to equity value, minority interest or non-operating assets, or tax shield effects from leverage.

Not tax or financial advice. Business valuation for transactional purposes (M&A, estate planning, buyouts, litigation) requires a certified business appraiser (CBA or CVA designation). IRS and legal proceedings require defensible valuations prepared by qualified professionals under formal standards (USPAP, AICPA VS Section). This calculator is for educational and directional planning use only.

Glossary

DCF valuation terms defined

Cash generated by the business after operating expenses and capital expenditures: Net Income + Depreciation & Amortization − Capital Expenditures − Change in Working Capital. The most important input to DCF valuation.
The blended rate of return required by all of a company's capital providers — equity holders and debt holders — weighted by their proportion of total capital. Used to discount future cash flows to present value.
The present value of all cash flows beyond the explicit forecast horizon, calculated as a perpetuity growing at a constant rate g. TV often represents 60–80% of total enterprise value.
A formula for terminal value: FCF_n × (1 + g) ÷ (WACC − g). Assumes cash flows grow at a constant rate g forever. Requires WACC > g; otherwise the denominator goes to zero or negative.
The total economic value of a business to all capital providers (equity and debt). EV = Market cap + Debt − Cash. Different from equity value, which subtracts net debt.
The rate used to convert future cash flows to present value, reflecting both the time value of money and the risk of those future cash flows. In DCF, the discount rate is the WACC.
The perpetual annual growth rate applied to cash flows in the Gordon Growth terminal value formula. Should not exceed long-run nominal GDP growth (~2.5–3% for U.S. businesses) to remain economically meaningful.
About

About this DCF business valuation calculator

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Questions

Frequently asked questions about the free business valuation (dcf) calculator

A business valuation (DCF) calculator is a free online tool that helps you estimate enterprise value via discounted cash flow with Gordon growth terminal value. Project free cash flows, discount at WACC, add a terminal value at sustainable long-term growth. It runs entirely in your browser with instant results and no sign-up.
No — these calculators provide quick estimates for planning and decisions. For tax filings, financial reporting, or formal valuations, use a CPA / CFA.
Most ratios assume GAAP figures from financial statements. For cash-basis or tax-basis filings, adjust the inputs accordingly.
Core finance formulas (DCF, IRR, depreciation methods, payment math) are stable. Tax-specific calculators (like-kind, repossession) reflect post-TCJA / 2025 rules where applicable.

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