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Discounted cash flow (DCF)Analyst

Value a business from its future free cash flow.

What you’ll enter

  • Free cash flow last year (millions)
  • Growth in forecast years
  • Forecast years
  • Terminal growth
  • Discount rate (WACC)
  • Net debt (millions)
  • Shares outstanding (millions)
  • Current share price (optional)

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The formula

EV = Σ FCFₜ ÷ (1 + WACC)ᵗ + [FCFₙ × (1 + g) ÷ (WACC − g)] ÷ (1 + WACC)ⁿ

Enterprise value is the value of all future free cash flow to the business. Subtract net debt to get equity value, then divide by shares.

If most of the value comes from the terminal value, the result depends heavily on your long-term assumptions.