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.
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, and corporate financial management.
Read more about Discounted Cash Flow: Discount Rate, History, Example DCF, Methods of Appraisal of A Company or Project, Shortcomings
Famous quotes containing the words cash and/or flow:
“Better eight hundred in cash than a thousand on credit.”
—Chinese proverb.
“On the idle hill of summer,
Sleepy with the flow of streams,”
—A.E. (Alfred Edward)