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| − | In [[Principles of Corporate Finance|Principles of Corporate Finance]] ''Discounted Cash Flow'' is defined as future [[Cash Flow|Cash Flow]]s multiplied by [[Discount Factor|Discount Factor]]s to obtain [[Present Value|Present Value]] ]. Cash flows are discounted for two reasons:
| + | Discounted Cash Flow |
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| − | 1) A dollar today is worth more than a dollar tomorrow
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| − | 2) A safe dollar is worth more than a risky one.
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| − | 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.
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| − | Source: http://www.investopedia.com/terms/d/dcf.asp
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| | [[Category:finance]] | | [[Category:finance]] |
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