Discounted Cash Flow Analysis
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A Discounted Cash Flow Analysis is a Financial Valuation Method that uses future free cash flow projections and discounts them to arrive at a present value.
- See: Stock Equity Valuation, Time Value of Money, Cash Flow, Discounting, Present Value, Net Present Value, Yield (Finance), Corporate Financial, Patent Valuation, Equity Premium Puzzle.
References
2014
- (Wikipedia, 2014) ⇒ http://en.wikipedia.org/wiki/discounted_cash_flow Retrieved:2014-8-5.
- In finance, discounted cash flow (DCF) analysis is a method of valuing a project, company, or asset using the concepts of the time value of money. All future cash flows are estimated and discounted to give their present values (PVs) — the sum of all future cash flows, both incoming and outgoing, is the net present value (NPV), which is taken as the value or price of the cash flows in question. Present value may also be expressed as a number of years' purchase of the future undiscounted annual cash flows expected to arise.
Using DCF analysis to compute the NPV takes as input cash flows and a discount rate and gives as output a price; the opposite process — taking cash flows and a price and inferring a discount rate — is called the yield.
Discounted cash flow analysis is widely used in investment finance, real estate development, corporate financial management and patent valuation.
- In finance, discounted cash flow (DCF) analysis is a method of valuing a project, company, or asset using the concepts of the time value of money. All future cash flows are estimated and discounted to give their present values (PVs) — the sum of all future cash flows, both incoming and outgoing, is the net present value (NPV), which is taken as the value or price of the cash flows in question. Present value may also be expressed as a number of years' purchase of the future undiscounted annual cash flows expected to arise.
2013
- http://www.investopedia.com/terms/d/dcf.asp
- QUOTE: A valuation method used to estimate the attractiveness of an investment opportunity. Discounted cash flow (DCF) analysis uses future free cash flow projections and discounts them (most often using the weighted average cost of capital) to arrive at a present value, which is used to evaluate the potential for investment. If the value arrived at through DCF analysis is higher than the current cost of the investment, the opportunity may be a good one. ...