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| ''Investment appraisal.''
| | The probability-weighted average (i.e. arithmetic mean of the distribution) of possible future cash flows. |
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| (DCF).
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| Discounted cash flow is a process of discounting cash flows that are expected in the future, to make them comparable in value with each other and with cash flows received today.
| | ==See also== |
| | | *[[IFRS 13]] |
| | | *[[Fair value]] |
| The DCF process is widely used in investment appraisal, where the rate used to discount with is a measure of the appropriately risk-adjusted cost of capital.
| | *[[Cash flow]] |
| | | *[[Expected value]] |
| Where the sum of discounted future positive cash flows (inflows) is calculated, this is often referred to as the total ''Present value'' of those cash flows.
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| Where the present value of future expected cash flows is netted against discounted investment outflows, this is referred to as the ''Net present value'' of the investment proposal.
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| Discounted cash flow techniques include Net Present Value (NPV) analysis and Internal Rate of Return (IRR) analysis.
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| == See also == | |
| * [[Cost of capital]] | |
| * [[Discount rate]]
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| * [[Discounting]]
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| * [[Incremental cash flows]]
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| * [[Internal rate of return]]
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| * [[Investment appraisal]] | |
| * [[Net present value]]
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| * [[Present value]] | |
| * [[Payback analysis]] | |
| * [[Project appraisal]]
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| * [[Time value of money]]
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| ===Other links===
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| [http://www.treasurers.org/node/8445 Masterclass: Discounted cash flow, ''Will Spinney'', The Treasurer]
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| [[Category:Corporate_finance]]
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Revision as of 17:38, 26 July 2015
The probability-weighted average (i.e. arithmetic mean of the distribution) of possible future cash flows.
See also