Free Discounted Cash Flow (DCF) Valuation Model Template

All Industries, Financial Model, General Excel Financial Models

5-year Financial Projections, Business Plans, Business Valuation, DCF Model, Discount Rate, Excel, Financial Model, Financial Planning, Financial Projections, Financial Reporting, Free Financial Model Templates, Terminal Value, Three Statement Model | Three Financial Statements, Valuation, WACC (Weighted Average Cost of Capital)

Understand the Core of Intrinsic Valuation

The Discounted Cash Flow (DCF) valuation method is a widely accepted intrinsic valuation approach under the income method. Unlike valuation techniques based on accounting profits or market multiples, DCF focuses on the cash a business can generate. It estimates a company’s value by projecting free cash flows and discounting them back to their present value using a rate that reflects risk and the time value of money.

This model emphasizes cash flows before debt or equity financing—known as Free Cash Flow to Firm (FCFF)—and captures the core drivers of valuation: EBIT, WACC, growth rate, and ROIC. Because of its foundation in economic fundamentals, DCF is considered one of the most theoretically sound and widely used valuation techniques.

How to Calculate Discounted Cash Flow in Excel?

This free Excel template helps users learn how to calculate a company’s Enterprise Value by discounting the forecasted Free Cash Flows to the Firm (FCFF) using a discount rate (WACC).

In understanding the company’s value, the users are suggested to follow the steps below:

Step 1 – Input Historical Financial Data:

Input at least three historical financial years (Income Statement, Balance Sheet, Cash Flow Statement) to build a foundation for the DCF model Excel template forecast.

Step 2 – Forecast Key Assumptions:

Enter key assumptions, including the first forecast year, revenue growth, margins, depreciation period, capital expenditures, and net working capital, to project the three-statement model.

Step 3 – Calculate Free Cash Flows to the Firm (FCFF):

Once the projected three-statement model is complete, Free Cash Flows to Firm for the next five years are automatically calculated and are used as a basis for the discounted cash flow model calculation. To arrive at the Free Cash Flows to the firm, the following are added or deducted from EBIT:

• Adjusted Taxes (the applicable income tax rate applied to EBIT)
• Add back Depreciation and Amortization, as these are non-cash expenses
• Net Change in Net Working Capital needs to account for any changes in the working capital required to run a company
• Deduct CAPEX, one of the major cash outflows
• Terminal Value

*Note: This model uses FCFF, which reflects the cash available to all capital providers. This differs from Free Cash Flow to Equity (FCFE), which accounts for debt service and is used for equity-only valuation.

Step 4 – Determine the Discount Rate (WACC):

The discount rate reflects the riskiness of the expected cash flows. This model helps users estimate it using the Weighted Average Cost of Capital (WACC), combining the cost of equity and debt proportionate to the company’s capital structure.

Step 5 – Estimate Terminal Value Using 10 Methods:

This DCF Excel template estimates the Terminal Value using ten different methods to value the business beyond the forecast period. Terminal Value represents the value generated from all expected cash flows beyond the forecasted period on a going-concern basis.

Users can input and adjust rates, periods, and exit multiple assumptions to see how different scenarios impact the Terminal Value across these methods:

1. Capitalized Earnings – Capitalization of EBIT less taxes at the company’s discount rate.
2. Gordon Growth – Capitalized free cash flows assuming perpetual growth.
3. H-Model – Two-stage growth model accounting for a transition from high to stable growth.
4. EV/Revenue Exit Multiple – Terminal value based on a revenue multiple at exit.
5. EV/EBITDA Exit Multiple – Terminal value based on a multiple of EBITDA.
6. EV/EBIT Exit Multiple – Terminal value based on a multiple of EBIT.
7. P/E Exit Multiple – Terminal value derived from a price-to-earnings ratio.
8. P/B Exit Multiple – Terminal value calculated using a price-to-book multiple.
9. One Stage Value Driver – Models excess return into the future using a single-stage formula.
10. Two-Stage Value Driver – Estimates terminal value as a function of ROIC (Return on Invested Capital) and growth in two distinct phases.

Step 6 – Discount Free Cash Flows and Terminal Value:

Here, using the discount rate, you discount each year’s free cash flow and the terminal value back to today. This shows what future cash is worth now. Use Excel’s formula:

=FCF / (1 + discount rate)^year

Do the same for the terminal value. Add all results to get the total present value. This step turns future estimates into a clear, current value.

Step 7 – Calculate Enterprise and Equity Value:

The discounted cash flow valuation model discounts all forecasted Free Cash Flows to the Firm (FCFF), including the estimated Terminal Value, to their present value using a discount factor.

The total net present value of these cash flows represents the Enterprise Value. The model adds the company’s Cash & Cash Equivalents to calculate the Equity Value and deducts Financial Debt. The resulting Equity Value is the final output of the discounted cash flow valuation model.

*Valuation Date: The DCF valuation is performed as of a specific date, which users can define. This date serves as the anchor point for discounting future cash flows.

What makes this DCF Excel Model Stand Out?

In calculating the companies’ Enterprise Value, it is essential to calculate the Terminal Value as realistically as possible, as this helps estimate the value of a business beyond the explicit forecast period. Capitalized Earnings, Gordon Growth, and Exit Multiples are the most common terminal value methods. These methods are helpful and valuable to users who wish to quickly evaluate their company using the DCF model discount rate (WACC), one steady growth rate, and competitors’ readily available exit multiples. However, these methods do not reflect reality as they do not consider drivers such as changes in the discount rate, competitive advantage period, and the effect of ROIC (Return on Invested Capital).

This Discounted Cash Flow calculator offers three other terminal values that consider those drivers:

1. H-Model has a high growth in discount rate for a period, and then decreases to a lower rate

2. One-Stage Value Driver considers the changes in Capital Employed and Growth rate:

3. Two-Stage Value Driver reflects the changes in competitive advantage and ROIC:

For a deeper understanding of how terminal value is calculated, check out Ten Ways to Estimate Terminal Value in DCF.

 

Master the Fundamentals of Valuation with This Free DCF Template

This free Discounted Cash Flow (DCF) Valuation Model in Excel is designed to help users understand and apply core valuation principles at any level. With both a Pro and Basic version included, this toolkit allows you to project cash flows, apply different terminal value methods, and confidently analyze intrinsic value. Whether exploring valuation for the first time or refining your understanding of terminal value techniques, this model provides a solid foundation for learning and experimentation.

Easily tailor the pre-filled forecast by modifying the light blue and blue input cells to reflect your specific business case and assumptions.

The fully editable Excel file is available for immediate download and comes with two versions:

• Pro Version – Includes ten terminal value methods: Capitalized Earnings, Gordon Growth, H-Model, Exit Multiples (EV/Revenue, EV/EBITDA, EV/EBIT, P/E, P/B), One-Stage Value Driver, and Two-Stage Value Driver.
• Basic Version – Offers Gordon Growth and Exit Multiple (EV/EBITDA) methods for quick and simple valuation analysis.
• Cup of Coffee – Acknowledge the work of the author by paying the author a voluntary cup of coffee, and you also get both model versions in one go.

.xlsx (MS Excel)

 

Ready for More In-Depth Valuation? Try the Advanced DCF Model!

Once you’ve mastered the basics using this free template, upgrade to the Advanced Discounted Cash Flow (DCF) Valuation Model Template in Excel for a more powerful, professional-grade solution. It includes a 10-year monthly forecast, ten terminal value methods, a robust WACC calculator, detailed scenario and sensitivity analysis, and pitchbook-ready outputs.

With industry-tailored assumptions and monthly granularity, it helps capture long-term value, model business cycles, and support strategic decision-making. Download now to perform accurate, insightful valuations with confidence.