Important Notice: Our web hosting provider recently started charging us for additional visits, which was unexpected. In response, we're seeking donations. Depending on the situation, we may explore different monetization options for our Community and Expert Contributors. It's crucial to provide more returns for their expertise and offer more Expert Validated Answers or AI Validated Answers. Learn more about our hosting issue here.

What is Discounted Cashflow Analysis and Valuation?

April 26, 2017analysis cashflow discounted valuation

0

Posted

What is Discounted Cashflow Analysis and Valuation?

1 Answer

0

Posted

The basic objective behind DCF Analysis is to project the future cash flows of your investment and then discount them back to the present in order to account for the time value of money. The rate used to discount the cash flows is usually the cost of capital or a required rate of return for a particular investor. The sum of the discounted cash flows is called the Present Value of the investment. If this figure is larger than the initial investment (Net Present Value is positive), then generally the investment is viewed favorably.