Advanced Finance
DCF & Terminal Value Calculator
Two terminal values side by side, because that is where a DCF is actually decided. The explicit forecast is arithmetic; the terminal value is a guess, and it is usually most of the answer. This shows how much of the enterprise value sits beyond the forecast — and what each terminal method implies about the other.
Inputs
- Free cash flow, year 1
- Growth during the forecast
- Explicit forecast years
- Discount rate (WACC)
- Perpetuity growth rate
- Exit multiple on final-year cash flow
How to use this calculator
- Enter year-1 free cash flow (cash after tax, capex and working capital, before interest) and the rate you expect it to grow through the forecast.
- Set the discount rate. If you do not have one, run the WACC calculator first; a wrong discount rate moves the answer more than almost anything else here.
- Fill in both terminal assumptions: a perpetuity growth rate (rarely above long-run GDP growth, so roughly 2–3%) and an exit multiple on final-year cash flow.
- Compare the two enterprise values. If they are far apart, your two terminal assumptions disagree with each other, and the two cross-check rows tell you by exactly how much.
- Look at the terminal share of value last and hardest. If most of the value sits after the forecast, the forecast is not what you are really arguing about.
What each term means
- Terminal value
- The value of everything after the explicit forecast ends. Usually the majority of a DCF, and always an assumption rather than a calculation.
- Gordon growth
- Valuing the cash flow after the forecast as a perpetuity growing at a constant rate: next year's cash flow divided by (discount rate − growth rate).
- Exit multiple
- The alternative: assume the business is sold at a multiple of its final-year cash flow, the way a comparable business trades or transacts today.
- Discount rate
- The return an investor requires for taking this risk. Usually WACC when valuing the whole enterprise.
- Enterprise value
- The value of the operating business to all capital providers, before subtracting net debt to get to equity.
Educational disclaimer: Outputs are simplified educational estimates built from the numbers you enter — they are not financial, legal, tax, or investment advice, and real decisions deserve verified figures and qualified professionals.