Warren Buffett DCF Intrinsic Value Calculator

This lesson teaches how to value a company’s owners earnings by discounting future cash flows over the life cycle of the stock. The intrinsic value calculator used is different from the one in course two, as it values the entire business as a whole. The calculator estimates the future cash flow, uses a short-term growth rate, and a discount rate to determine the intrinsic value per share. The calculator also calculates the discounted perpetuity cash flow for cash flows beyond the ten-year mark, discounting it back to today’s value. A final step allows adjustment of the discount rate until it equals the market price. The lesson concludes by discussing how this calculator can be adjusted for short periods of high growth rates, and how to value a company like IBM that has an accounting trick that keeps the book value per share flat.