Here we have the steps for discounting We've got five free cash flows (free cash flows 1, 2, 3, 4, 5) And in year five or period five we have a terminal value We now need to start discounting them and the first thing to do is to calculate a discount factor Our discount factor formula for period 1 is One divided by one plus the WACC, all to the power of the period we're in. And we're in period 1, so it's to the power of 1 For period 2, similar formula, one over one plus the WACC but now to the power of two That gives us five discount factors. We can then multiply those discount factors by the free cash flows to get our present value Free cash flow times by discount factor That gives me five present values and if I sum those five numbers up, that will get me the sum of the present value of free cash flows However there's still one item that we haven't discounted and that was the terminal value So the terminal value is currently sitting in period 5 So I multiply terminal value by the discount factor from year 5 The enterprise value is now the sum of the two items above You take your sum of the present value of the free cash flows You add on the present value of your terminal value and you've done it. That is your enterprise value done!