Discounted Cash Flow Calculator
Discount a series of projected cash flows at a chosen rate to estimate their value today, the core of discounted cash flow valuation.
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Enter a rate and at least two cash flows to see the DCF value.
Worked example
With these example inputs:
- Discount rate12%
- Projected cash flows-5,000,015,000,180,002,000,000,000
DCF value (NPV): $7,942
- Net cash flow (undiscounted)$28,000
- Periods4
Frequently asked questions
What is discounted cash flow?
DCF values an asset as the sum of its future cash flows discounted to today. The discount rate reflects risk and the time value of money.
How reliable is a DCF?
A DCF is only as good as its inputs. Small changes in the discount rate or forecasts can shift the value a lot, so test a range of assumptions.
What is discounted cash flow in simple terms?
Discounted cash flow, or DCF, is a way to work out what a stream of future cash is worth today. Money in the future is worth less than money now, so each future amount is shrunk, or discounted, before being added up. The total is the present value of all those cash flows. It is a core method for valuing investments, projects, and whole companies.
How does the tool work out the value?
It discounts each cash flow by dividing it by one plus the rate, raised to the power of its period number. The first amount sits at time zero and is not discounted, the next is divided once, the one after twice, and so on. Then it adds all the discounted amounts together. So with the example flows and a 12 percent rate, the DCF value comes to about 7,942.
Why does the discount rate matter so much?
The discount rate decides how heavily future cash is shrunk, so it has a big effect on the answer. A higher rate makes distant cash worth much less today and lowers the value, while a lower rate raises it. Even a one or two point change can swing the result a lot. So the rate should reflect the risk and the return you could earn elsewhere, and the value is best read as an estimate that depends on that choice.