Compare DCF scenarios
Change one input, hold everything else identical, and see how much that one input is actually worth. The gap between the scenarios is the whole answer.
What to compare
Everything else below is held identical across the scenarios, so the only thing separating the lines is this one input.
Shared by every scenario
The latest free cash flow the projection grows from.
Perpetual growth after the projection. Must stay below the discount rate, and below long-run GDP growth to be credible.
Side by side
| Scenario | Discount rate | Intrinsic value |
|---|---|---|
| Scenario A | 6% | ₹5,24,88,699 |
| Scenario B | 12% | ₹1,61,87,083 |
| Scenario C | 18% | ₹91,77,524 |
Moving discount rate from 6% to 18% changes intrinsic value by −₹4,33,11,175. Every other input was identical in both.
Show how each scenario is calculatedHide the working
Scenario A — 6%
A DCF adds up many discounted years, so this shows the first year in full and then the totals the engine produced for the rest.
Next year’s cash flow
₹10,00,000 × (1 + 0.08)
= ₹10,80,000
Discount it back to today
₹10,80,000 ÷ (1 + 0.06)
= ₹10,18,868
A rupee next year is worth less than a rupee today, and the discount rate is how much less.
All 10 projected years, discounted and added
the same two steps repeated for each year
= ₹1,10,98,752
Everything after that, as a terminal value
growing forever at 3%, discounted back
= ₹4,13,89,947
This is usually the larger half, and it rests entirely on an assumption about the distant future.
Add the two halves
₹1,10,98,752 + ₹4,13,89,947
= ₹5,24,88,699
Scenario B — 12%
A DCF adds up many discounted years, so this shows the first year in full and then the totals the engine produced for the rest.
Next year’s cash flow
₹10,00,000 × (1 + 0.08)
= ₹10,80,000
Discount it back to today
₹10,80,000 ÷ (1 + 0.12)
= ₹9,64,286
A rupee next year is worth less than a rupee today, and the discount rate is how much less.
All 10 projected years, discounted and added
the same two steps repeated for each year
= ₹82,31,866
Everything after that, as a terminal value
growing forever at 3%, discounted back
= ₹79,55,217
This is usually the larger half, and it rests entirely on an assumption about the distant future.
Add the two halves
₹82,31,866 + ₹79,55,217
= ₹1,61,87,083
Scenario C — 18%
A DCF adds up many discounted years, so this shows the first year in full and then the totals the engine produced for the rest.
Next year’s cash flow
₹10,00,000 × (1 + 0.08)
= ₹10,80,000
Discount it back to today
₹10,80,000 ÷ (1 + 0.18)
= ₹9,15,254
A rupee next year is worth less than a rupee today, and the discount rate is how much less.
All 10 projected years, discounted and added
the same two steps repeated for each year
= ₹63,45,066
Everything after that, as a terminal value
growing forever at 3%, discounted back
= ₹28,32,458
This is usually the larger half, and it rests entirely on an assumption about the distant future.
Add the two halves
₹63,45,066 + ₹28,32,458
= ₹91,77,524
Every scenario is computed by the same engine the intrinsic value calculator uses, so the last line of each is the figure in the table above. Intermediate values are shown rounded for reading; the calculation carries full precision throughout.
Over time
Each line is one scenario. Because every other input is identical, the gap between them is the effect of discount rate alone.
How to read this
- Only one input differs. Every other value is identical across the scenarios, which is what makes the gap between them readable. If each scenario had its own assumed return, the chart would be comparing guesses rather than choices.
- A bigger number is not automatically better. On a loan comparison the larger figure is the worse one, and on any of these the right answer depends on circumstances this page knows nothing about.
- The rate is still an assumption. Comparing scenarios does not make any of them a forecast — it only shows how sensitive the outcome is to the input you changed.
To see the arithmetic behind a single scenario, use the DCF Calculator, which shows the formula and works it through with your numbers.