How this calculator works
FCFF mode discounts annual cash available to all capital providers at WACC, adds a terminal phase, then adds excess cash and subtracts debt to estimate equity value. Divide by shares for a per-share estimate. EPS mode projects current earnings through an initial growth stage and treats every dollar of EPS as distributable cash, a strong simplifying assumption; use a cost-of-equity discount rate. Terminal growth can continue forever or for a finite stated number of years. The relative-price output compares model value with the supplied observed price.
Formula
Operating value = sum(FCFF_t/(1+r)^t) + TV/(1+r)^N. Perpetuity TV = FCFF_N(1+g)/(r-g), requiring r>g. Equity = operating value + excess cash - debt. EPS proxy value discounts EPS cash-flow proxies directly per share.
Worked example
With one $100 FCFF in year one, a 10% discount rate and zero perpetual growth, firm value is $1,000. Adding $50 cash, subtracting $100 debt and dividing by 100 shares gives $9.50 per share. An unchanged $5 EPS fully paid forever at a 10% cost of equity gives a $50 per-share proxy value.
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Frequently asked questions
Can discount rate equal perpetual growth?
No for a growing perpetuity: the denominator would be zero. A finite terminal phase supports equal rates because its sum is bounded.
Are earnings the same as free cash flow?
No. EPS mode explicitly assumes earnings can be distributed without additional reinvestment. Prefer a cash-flow forecast when that assumption is unsuitable.
Does a value above market price mean I should buy?
No. DCF is sensitive to forecasts, discount rate, debt adjustments and terminal assumptions. The comparison reports the arithmetic of your scenario.