🏢 Discounted Cash Flow (DCF) Calculator
Estimate Warren Buffett-style intrinsic fair market value per share with a two-stage Gordon Growth DCF model.
Valuation Summary
DCF Sensitivity and Margin of Safety
Because DCF outputs are highly sensitive to small shifts in discount rates and terminal growth assumptions, disciplined investors require a generous "Margin of Safety" (typically 15% to 30% discount to calculated intrinsic value) before allocating substantial capital.
Frequently asked questions
What is a Discounted Cash Flow (DCF) model?
A DCF model estimates the fair intrinsic value of an asset today based on the present value of all future cash flows it can generate, discounted back using a chosen cost of capital (WACC).
What discount rate (WACC) should I use?
Most analysts use an 8% to 11% discount rate for stable large-cap corporations, and 12% to 15% for cyclical or higher-beta growth stocks to reflect higher equity risk premium.
Why is the terminal growth rate capped around 2% to 3%?
In the perpetual terminal stage (Gordon Growth Model), a company cannot indefinitely grow faster than overall long-term GDP growth (historically 2%–3%), otherwise it would mathematically swallow the entire global economy.
How does net debt impact equity valuation in a DCF?
Discounted cash flows produce Enterprise Value. To derive Equity Value (available to common shareholders), you subtract total interest-bearing debt and add back excess cash and liquid equivalents.