DCF valuation method. Follow every calculation.

The valuation, step by step

Follow these ten steps in order. Each step explains what the calculator does, the formula it uses and what you get. Where a setting changes the method, both options are explained within the same step.

For hand calculations, use decimal rates in formulas: 12% becomes 0.12. In the calculator’s percentage fields, enter 12 for 12%. Check unknown financial figures rather than entering a guessed zero.

1. Step 01

   Set up the company and units

   Enter the company name and choose its country, reporting currency and amount scale. India defaults to INR and crores. Keep all financial amounts in the same currency and scale; enter fully diluted shares as a full count, not in crores. Changing currency does not convert amounts.

   What you get: A consistent set of units for the entire valuation.

2. Step 02

   Enter the financials and calculate starting cash flow

   Use one full financial year and the same consolidated business for revenue, EBITDA, depreciation, tax, capital expenditure and the change in working capital. Also enter cash, debt, other assets, other claims, net income and diluted shares. Free cash flow to the firm (FCFF) is the cash available to all capital providers after operating costs and reinvestment.

   • EBIT = EBITDA − depreciation and amortisation
   • Cash tax = max(EBIT, 0) × tax rate
   • NOPAT = EBIT − cash tax
   • Base FCFF = NOPAT + depreciation − capital expenditure − increase in working capital

   What you get: Starting operating profit, after-tax operating profit (NOPAT) and FCFF. A loss does not receive an immediate cash-tax credit.

3. Step 03

   Forecast cash flow for each future year

   Choose your forecast period and one forecast mode. The calculator produces a cash-flow estimate for every year in that period.

   Operating-driver mode

   Project sales, operating margins and reinvestment. Revenue growth gradually moves towards terminal growth; EBIT margin moves towards your target. Depreciation and capital expenditure are percentages of revenue. Working-capital investment is a percentage of the change in revenue. Calculate each year’s EBIT from revenue and margin, then apply the FCFF formula in Step 02.

   • Base EBIT margin = base EBIT / base revenue
   • Growth in year t = initial growth + (terminal growth − initial growth) × (t − 1) / (N − 1)
   • EBIT margin in year t = base margin + (target margin − base margin) × t / N

   Simple FCFF mode

   Grow starting FCFF at one constant rate. This is a simpler check: it does not separately forecast revenue, margins or reinvestment.

   • FCFF in year t = base FCFF × (1 + growth rate)^t

   What you get: Annual forecast FCFF. Here t is the year number and N is the number of forecast years. For a one-year operating forecast, the calculator uses the initial growth rate.

4. Step 04

   Set the discount rate

   The weighted average cost of capital (WACC) is the return required by equity and debt investors. Either enter a WACC directly, or calculate it using CAPM inputs and your target debt/equity mix at market value.

   • Cost of equity = risk-free rate + beta × equity risk premium
   • WACC = cost of equity × (1 − debt weight) + pre-tax cost of debt × (1 − tax rate) × debt weight

   What you get: One effective WACC, used consistently throughout the DCF. A manually entered WACC is used as supplied, not replaced by a live benchmark.

5. Step 05

   Convert each forecast cash flow to today’s value

   Money received later is worth less today. Discount each year’s FCFF using the effective WACC. Choose year-end timing for cash received at the end of each year, or mid-year timing for cash received around the middle of the year.

   • Year-end present value = FCFF in year t / (1 + WACC)^t
   • Mid-year present value = FCFF in year t / (1 + WACC)^(t − 0.5)

   What you get: The present value of every forecast year’s FCFF.

6. Step 06

   Estimate cash flow after the forecast period

   Choose a sustainable long-run growth rate, called terminal growth (g). This rate must be lower than WACC. The calculator estimates the cash flow for the year immediately after your explicit forecast.

   Operating-driver mode

   Grow the last forecast revenue at g and apply the target EBIT margin and operating tax rate. Allow for the reinvestment needed to support growth, using the return on new invested capital (ROC). ROC must be positive and at least g.

   • Terminal revenue = last forecast revenue × (1 + g)
   • Reinvestment rate = g / ROC
   • Terminal FCFF = terminal NOPAT × (1 − reinvestment rate)

   Simple FCFF mode

   Grow the final forecast FCFF by the terminal growth rate.

   • Terminal FCFF = last forecast FCFF × (1 + g)

   What you get: A sustainable next-period FCFF rather than an assumed exit price.

7. Step 07

   Calculate and discount the terminal value

   Terminal value represents the operating cash flows beyond the forecast period. Calculate that value, then discount it back to today using the same timing convention as the forecast cash flows.

   • Terminal value = terminal FCFF / (WACC − g)
   • Present value of terminal value = terminal value / (1 + WACC)^period

   What you get: A present value for the cash flows beyond the forecast. Period is N for year-end timing or N − 0.5 for mid-year timing.

8. Step 08

   Add up the operating business value

   Add the present values from the explicit forecast and the terminal value. This gives operating enterprise value, before the cash/debt adjustment for shareholders.

   • Enterprise value = sum of forecast cash-flow present values + present value of terminal value

   What you get: The estimated value of the company’s operating business today.

9. Step 09

   Calculate equity value and value per share

   Add cash and non-operating assets, then subtract debt and other claims. Divide what remains for shareholders by the fully diluted share count.

   • Equity value = enterprise value + cash + non-operating assets − debt − other claims
   • Value per share = equity value / fully diluted shares

   What you get: An estimated equity value and per-share value in the selected currency. The calculator accounts for the selected amount scale; shares stay in full units.

10. Step 10

    Review the assumptions, compare and export

    Check the calculation sheet, scenario results and WACC/terminal-growth sensitivity grid. Compare optional peer multiples separately; they are not averaged into the DCF. An optional exit EV/EBITDA check requires an operating-driver forecast and discounts its exit value from the final year-end. Recalculate after changing inputs, then export the CSV or printable report.

    What you get: A documented valuation with visible assumptions and separate cross-checks—not a guaranteed market price.