DCF Calculator
Calculate the present value of future cash flows using Discounted Cash Flow (DCF) analysis.
Cash Flow Details
Results
Present Value of Cash Flows
$0
Present Value of Terminal Value
$0
Total Present Value
$0
Net Present Value
$0
Cash Flow Timeline
Year-wise Breakdown
| Year | Cash Flow | Discount Factor | Present Value |
|---|
How DCF Analysis Works
Discounted Cash Flow (DCF) analysis is a valuation method used to estimate the value of an investment based on its expected future cash flows. DCF analysis attempts to determine the value of an investment today, based on projections of how much money it will generate in the future.
The DCF formula is:
PV = CF₁/(1+r)¹ + CF₂/(1+r)² + ... + CFₙ/(1+r)ⁿ + TV/(1+r)ⁿ
Where:
- PV = Present Value
- CF = Cash Flow for each period
- r = Discount Rate
- n = Number of periods
- TV = Terminal Value
The Terminal Value is calculated using the Gordon Growth Model:
TV = CFₙ(1+g)/(r-g)
Where:
- g = Long-term growth rate
- CFₙ = Final year's cash flow
Benefits of DCF Analysis
Intrinsic Value
DCF analysis helps determine the true intrinsic value of an investment based on its future cash flows.
Time Value of Money
Accounts for the time value of money by discounting future cash flows to their present value.
Long-term Perspective
Provides a long-term view of an investment's value, considering both explicit forecast period and terminal value.
Flexibility
Can be customized to include different growth rates, discount rates, and cash flow patterns.
Decision Making
Helps in making informed investment decisions by comparing present value with initial investment.
Risk Assessment
Allows for sensitivity analysis by adjusting discount rates and growth assumptions.