How this calculator works
Each method looks at value from a different angle. Discounted cash flow values the future cash the business produces today, using an annuity for a level annual cash flow over the chosen number of years. Asset-based valuation subtracts liabilities from assets. Market capitalization multiplies the share count by the share price for a listed company. The multiples method applies a market multiple to earnings, EBITDA or sales. A valuation is an estimate: the method, the discount rate and the comparable companies all change the answer.
Formula
DCF value = cash flow × (1 - (1 + r)^-n) / r, where r is the discount rate and n the number of years; at a zero rate it is cash flow × n. Asset-based value = assets - liabilities. Market capitalization = shares × price per share. Multiples value = metric × multiple.
Worked example
A business with $120,000 of annual cash flow, valued over five years at a 10% discount rate, is worth $120,000 × 3.790787 = $454,894. An asset-based valuation with $800,000 of assets and $300,000 of liabilities is $500,000. A company with 10,000 shares at $25 is worth $250,000, and $250,000 of EBITDA at a multiple of 8 is $2,000,000.
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Frequently asked questions
Which method is best?
Use more than one and compare. DCF is sensitive to the discount rate and assumes a steady cash flow here. Multiples reflect what buyers currently pay for similar businesses. Asset-based valuation suits asset-heavy companies but ignores future earnings. A real valuation often blends them.
What discount rate should I use?
The rate should reflect the risk of the cash flows and the return an investor could get elsewhere. Many small business valuations use a rate built from a risk-free rate plus an equity risk premium and a size or company-specific premium. The right rate is a judgement, so test a range.
Does the DCF include a final or terminal value?
No. This version discounts a level annual cash flow over the years you enter and adds nothing after that. Real valuations often add a terminal value for cash beyond the forecast period, which can be most of the total, so treat this as a partial estimate.