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Discounted Cash Flow (DCF) Calculator
Determine the intrinsic value of your startup by discounting projected future cash flows to their present value.
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Enter next year's free cash flow, growth, discount rate and exit multiple, then calculate. You get enterprise value and the present value of each year.
Methodology and formulas
DCF Formula
The Discounted Cash Flow (DCF) method estimates the value of an investment based on its expected future cash flows.
1. Projected Cash Flows
Cash Flow Year N = Year 1 Cash Flow × (1 + Growth Rate)^N
2. Discount Factor
Discount Factor = 1 / (1 + WACC)^N
3. Present Value (PV)
PV = Cash Flow × Discount Factor
4. Terminal Value
Terminal Value = Final Year Cash Flow × Terminal Multiple
5. Enterprise Value
Enterprise Value = Sum of Discounted Cash Flows + Discounted Terminal Value
Questions
- What is a DCF valuation?
- A Discounted Cash Flow (DCF) valuation is a method of valuing a company using the concepts of the time value of money. It estimates the value of an investment based on its expected future cash flows, adjusted for risk and time.
- What discount rate should startups use?
- Startups typically use a higher discount rate (WACC) than established companies to account for higher risk. Rates between 15% and 50% are common depending on the stage, with early-stage companies often at the higher end of that range.
- How does terminal value affect DCF?
- Terminal value represents the value of the company beyond the projection period and often accounts for a large majority (50-80%) of the total DCF valuation. It assumes the company grows at a stable rate or is sold for a multiple of its cash flow.
- When is DCF not appropriate?
- DCF is less reliable for early-stage startups with negative cash flows or unpredictable growth. In these cases, method-based valuations (like Berkus or Scorecard) or comparable market multiples may be more appropriate.
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