DCF Pricing
Discounted cash-flow pricing helper.
These tools are provided for educational and operational guidance only. Results are estimates and may not reflect all factors in your business. Always review calculations and use your own professional judgement before making decisions.
What is this tool?
This tool helps you evaluate the present value of a stream of cash flows using discounted cash-flow (DCF) logic. You can use it to sanity-check the price of long-term contracts, subscriptions, or projects where value is realised over time rather than upfront.
Formula
The calculator applies the standard Net Present Value (NPV) formula:
NPV = Σ [ CFt ÷ (1 + r)t ]
- CFt = cash flow in period t.
- r = discount rate per period (for example, required return or cost of capital).
- t = period index (1, 2, 3, ...).
You enter a list of cash flows and a discount rate; the tool returns the NPV. A higher NPV suggests a more attractive project at that discount rate.
Example
With the default cash flows 100, 90, 80, 70 and discount rate 10%, the NPV is the sum of:
100 ÷ 1.1 + 90 ÷ 1.1² + 80 ÷ 1.1³ + 70 ÷ 1.1⁴
The calculated NPV is a single number you can compare to the required upfront investment or to alternative projects.
When should you use this tool?
- When evaluating long-term contracts or service agreements with multi-period cash flows.
- When comparing different pricing options such as upfront vs. subscription models.
- When checking whether a proposed project clears a required rate of return.
- When communicating the financial logic behind a pricing decision to stakeholders.
How this tool helps your business
- Encourages decisions based on future cash flows rather than only on revenue.
- Helps align pricing decisions with financial metrics like NPV and ROI.
- Supports better negotiations by making time value of money explicit.
- Reduces the risk of accepting deals that look good on revenue but destroy value.
Related tools
- Margin & Markup Calculator – connect unit-level margin logic with long-term profitability.
- Break-Even Point Calculator – understand the volume you need to support fixed costs before running DCF analysis.
- CSV Profit Analyzer – compare forecasted DCF-based values with realised cash flows from actual sales.
Frequently Asked Questions
How do I choose the discount rate?
Many teams use their weighted average cost of capital, hurdle rate, or an opportunity cost benchmark. Higher rates penalise distant cash flows more strongly.
Can cash flows be negative?
Yes. You can include both negative and positive cash flows to represent investments and returns. The tool will discount them all in the same way.
Is this a full valuation model?
No. It is a lightweight helper for simple cash-flow streams. For complex projects you should build a more detailed model, but this tool is useful for quick checks and intuition.
Should I include inflation in the cash flows or the rate?
Be consistent: either use nominal cash flows with a nominal discount rate, or real cash flows with a real rate. Mixing approaches can distort results.