---
name: "valuation_dcf"
area: "valuation"
title: "Value a company by DCF"
price: "free"
method: "POST"
url: "https://api.conecto.chat/v1/tools/valuation_dcf"
mcp_server: "https://api.conecto.chat/mcp/valuation"
auth: "Authorization: Bearer <conecto_sk_ key>"
docs_url: "https://conecto.chat/tools/valuation/valuation_dcf"
---

# Value a company by DCF (`valuation_dcf`)

A DCF valuation from free cash flows and a WACC: present values, terminal value, enterprise and equity value, and a sensitivity grid.

A discounted cash flow valuation from free cash flows (or EBIT, depreciation, capex and the change in working capital, with tax_rate) and a WACC: each year's present value, the terminal value by Gordon growth or an exit multiple, enterprise value, equity value after net debt, the value per share, the terminal value's share and a WACC by growth (or exit multiple) grid. End-of-year discounting, or mid_year. Rates are decimals: 0.09 is 9%.

Price: Free up to 1,000,000 reads a month for the whole account, then $0.50 per 10,000 reads. A call that fails costs nothing.

## Use it when

To value a company from its forecast cash flows.

- For a value from listed peers, use [valuation_multiples](https://conecto.chat/tools/valuation/valuation_multiples.md).

## Say this to your agent

> Kuechentechnik Nord should make 1.9, 2.1 and 2.3 million in free cash flow over the next three years. What is it worth at a 9.2% discount rate?

## Inputs

| Name | Type | Required | Description | Allowed values | Default |
|---|---|---|---|---|---|
| `cash_flows` | array of objects | yes | The forecast years in order, the first one year from the valuation date. 1 to 30 items. |  |  |
| `cash_flows[].year` | integer | no | 1,900 to 2,200. |  |  |
| `cash_flows[].free_cash_flow` | number | no | Unlevered free cash flow. Or give ebit and the parts below. |  |  |
| `cash_flows[].ebit` | number | no |  |  |  |
| `cash_flows[].depreciation` | number | no |  |  |  |
| `cash_flows[].capex` | number | no |  |  |  |
| `cash_flows[].nwc_change` | number | no | The increase in net working capital (a decrease is negative). |  |  |
| `cash_flows[].ebitda` | number | no | For an exit multiple, and the implied multiple of a growth terminal value. |  |  |
| `wacc` | number | yes | The discount rate. A decimal: 0.09 is 9%. At most 1. |  |  |
| `terminal` | object | yes |  |  |  |
| `terminal.method` | string | yes, when `terminal` is given |  | `"growth"`, `"exit_multiple"` |  |
| `terminal.growth` | number | no | Growth after the last year, for method growth. A decimal: 0.09 is 9%. -0.5 to 0.5. |  |  |
| `terminal.multiple` | number | no | For method exit_multiple: 8 is 8x. At most 1,000. |  |  |
| `terminal.metric` | string | no |  | `"ebitda"`, `"ebit"` | `"ebitda"` |
| `terminal.metric_value` | number | no | The metric the exit multiple applies to; the last year's by default. |  |  |
| `tax_rate` | number | no | Needed when a year gives ebit instead of free_cash_flow. A decimal: 0.09 is 9%. 0 to 1. |  |  |
| `mid_year` | boolean | no | Cash flows arrive mid-year, so each is discounted half a year less. |  | `false` |
| `net_debt` | number | no |  |  | `0` |
| `adjustments` | array of objects | no | Up to 20 items. |  |  |
| `adjustments[].label` | string | yes, in each item of `adjustments` | 1 to 200 characters. |  |  |
| `adjustments[].amount` | number | yes, in each item of `adjustments` | Added to equity value; negative to take away. |  |  |
| `shares` | number | no |  |  |  |
| `sensitivity` | object | no |  |  |  |
| `sensitivity.steps` | integer | no | 1 to 3. |  | `2` |
| `sensitivity.wacc_step` | number | no | 0.0005 to 0.05. |  | `0.005` |
| `sensitivity.growth_step` | number | no | 0.0005 to 0.05. |  | `0.005` |
| `sensitivity.multiple_step` | number | no | 0.1 to 5. |  | `0.5` |
| `currency` | string | no | Shown with the figures, e.g. EUR. Nothing is converted. Up to 10 characters. |  |  |

## Example

Written for Hansen & Voss, a restaurant-equipment wholesaler in Hamburg with 60 staff.

MCP: call `valuation_dcf` on the MCP server `https://api.conecto.chat/mcp/valuation` with these arguments:

```json
{
  "cash_flows": [
    {
      "year": 2027,
      "free_cash_flow": 1.9
    },
    {
      "year": 2028,
      "free_cash_flow": 2.1
    },
    {
      "year": 2029,
      "free_cash_flow": 2.3,
      "ebitda": 3.4
    }
  ],
  "wacc": 0.092,
  "terminal": {
    "method": "growth",
    "growth": 0.015
  },
  "net_debt": 4.2,
  "currency": "EUR"
}
```

REST:

```bash
curl https://api.conecto.chat/v1/tools/valuation_dcf \
  -H "Authorization: Bearer $CONECTO_KEY" \
  -H "Content-Type: application/json" \
  -d '{"cash_flows": [{"year": 2027, "free_cash_flow": 1.9}, {"year": 2028, "free_cash_flow": 2.1}, {"year": 2029, "free_cash_flow": 2.3, "ebitda": 3.4}], "wacc": 0.092, "terminal": {"method": "growth", "growth": 0.015}, "net_debt": 4.2, "currency": "EUR"}'
```

## Response

```json
{
  "call_id": "5f0c8a2e-3b7d-4c1e-9a64-2d8e1f7b0c93",
  "tool": "valuation_dcf",
  "status": "succeeded",
  "replayed": false,
  "cost_usd": "$0.00",
  "balance_usd": "$19.75",
  "result": {
    "years": [
      {
        "year": 2027,
        "period": 1,
        "free_cash_flow": 1.9,
        "discount_period": 1,
        "discount_factor": 0.915751,
        "present_value": 1.74
      },
      {
        "year": 2028,
        "period": 2,
        "free_cash_flow": 2.1,
        "discount_period": 2,
        "discount_factor": 0.8386,
        "present_value": 1.76
      }
    ],
    "present_value_of_cash_flows": 5.27,
    "terminal_value": {
      "method": "growth",
      "growth": 0.015,
      "value": 30.32,
      "discount_period": 3,
      "implied_exit_multiple": 8.917112,
      "present_value": 23.28,
      "share_of_enterprise_value": 0.815508
    },
    "enterprise_value": 28.55,
    "net_debt": 4.2,
    "adjustments": [],
    "equity_value": 24.35,
    "sensitivity": {
      "wacc": [
        0.082,
        0.087
      ],
      "growth": [
        0.005,
        0.01
      ],
      "enterprise_value": [
        [
          29.06,
          30.84
        ],
        [
          27.26,
          28.81
        ]
      ],
      "equity_value": [
        [
          24.86,
          26.64
        ],
        [
          23.06,
          24.61
        ]
      ]
    },
    "currency": "EUR",
    "method": "Free cash flow discounted at the WACC at the end of each year. Terminal value by Gordon growth, FCF x (1 + g) / (WACC - g), discounted with the last year. Equity value = enterprise value - net debt + adjustments."
  }
}
```

`result`: years (free_cash_flow, discount_period, discount_factor, present_value), present_value_of_cash_flows, terminal_value (method, value, present_value, share_of_enterprise_value, implied_exit_multiple or implied_growth), enterprise_value, net_debt, adjustments, equity_value, value_per_share when shares are given, sensitivity (wacc by growth or exit_multiple, with enterprise_value and equity_value) and method.

## Errors

| Code | Status | When | Fix |
|---|---|---|---|
| `invalid_input` | 400 | The growth rate is at or above the WACC, a year has neither free cash flow nor EBIT, EBIT came without a tax rate, or an exit multiple has no EBITDA to apply to. | The message names the figure: give it, or set the growth rate below the WACC. |

The refusals every tool can give (401 key, 402 balance, 429 limits) are on the errors page: https://conecto.chat/docs/errors.md

## Related

- [valuation_wacc](https://conecto.chat/tools/valuation/valuation_wacc.md): The WACC from the risk-free rate, the market premium and a beta relevered from peers, with each step written out. Free up to 1,000,000 reads a month.
- [valuation_rates](https://conecto.chat/tools/valuation/valuation_rates.md): Today's risk-free curve and its recent average from the Bundesbank, the ECB or the US Treasury, as decimals. Free up to 1,000,000 reads a month.
- [valuation_fx](https://conecto.chat/tools/valuation/valuation_fx.md): Amounts converted between currencies at the ECB's euro reference rates, on a date or at a past year's average. Free up to 1,000,000 reads a month.
- [valuation_multiples](https://conecto.chat/tools/valuation/valuation_multiples.md): Peer multiples with their quartiles and the enterprise and equity value they imply for the target, less any discount. Free up to 1,000,000 reads a month.
- [valuation_lbo](https://conecto.chat/tools/valuation/valuation_lbo.md): A buyout financed with debt, year by year: sources and uses, each debt tranche, the exit, MOIC, IRR and an IRR grid by entry and exit multiple. Free up to 1,000,000 reads a month.
- [valuation_benchmark](https://conecto.chat/tools/valuation/valuation_benchmark.md): The target's KPIs against its peers: quartiles, percentile, gap to the median and whether each is a strength or a potential. Free up to 1,000,000 reads a month.
- [valuation_scores](https://conecto.chat/tools/valuation/valuation_scores.md): Altman, Piotroski and Beneish scores from a company's figures, and whether it is growing, mature or distressed. Free up to 1,000,000 reads a month.
- [valuation_forecast](https://conecto.chat/tools/valuation/valuation_forecast.md): Model forecasts with 80% and 95% intervals for revenue, EBITDA or monthly sales, with a confidence label and the plan checked against the range. Free up to 1,000,000 reads a month.
- [valuation_beta](https://conecto.chat/tools/valuation/valuation_beta.md): Betas of listed peers from closing prices the business gives, with R squared, the t-statistic and the unlevered beta. Free up to 1,000,000 reads a month.
- [valuation_football_field](https://conecto.chat/tools/valuation/valuation_football_field.md): The valuation ranges side by side, with the overall range, the overlap, markers and a slide for the deck. Free up to 1,000,000 reads a month.