A discounted cash flow analysis is a method of asset or company valuation. Discounted Cash Flow analysis is widely used in finance Investment, real estate, and corporate finance management. It is mostly used by investors to check whether their investment will make a valuable profit or not.
It was widely used in the finance industry in the 1700s or 1800s, widely discussed in financial economics in the 1960s, and started widely used in U.S. courts in the 1980s and 1990s.
The discounted cash flow formula to calculate growth value, terminal value, and Intrinsic value is as follows:
Coefficient A = (1 + g) / (1 + r)
First part is, growth value = EPS * A * (1 - AYg ) / (1 - A)
Coefficient B = (1 + t) / (1 + r)
And second part is, terminal value = EPS * AYg * B * (1 - BYt ) / (1 - B)
Now, intrinsic value = growth value + terminal value
- EPS is a Earnings per share
- A and B are coefficients
- r is a discount rate
- g is growth rate
- Yg is a number of years when your buisness is growing at the grow rate
- t is terminal growth rate
- Yt is a number of years in terminal growth rate
What can you do with Discounted Cash Flow Calculator?
- It helps to calculate the actual value of the asset or company and helps to project your future profit earnings.
- Users can see the accurate value of the intrinsic value, growth value and terminal value. And also can see the intrinsic value in words.
- This calculator helps to share your calculations by URL.