Discounted cash flow: Difference between revisions
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(DCF). A process of discounting cash flows that are expected in the future to make them comparable in value with cash flows received today. | (DCF). | ||
A process of discounting cash flows that are expected in the future to make them comparable in value with cash flows received today. | |||
This 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. | This 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. | ||
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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. | 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. | ||
Discounted cash flow techniques include Net Present Value (NPV) analysis and Internal Rate of Return (IRR) analysis. | Discounted cash flow techniques include Net Present Value (NPV) analysis and Internal Rate of Return (IRR) analysis. | ||
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== See also == | == See also == | ||
* [[CertFMM]] | |||
* [[Discount rate]] | * [[Discount rate]] | ||
* [[Incremental cash flows]] | * [[Incremental cash flows]] | ||
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== | ===Other links=== | ||
[http://www.treasurers.org/node/8445 Masterclass; Discounted cash flow, The Treasurer, October 2012] | [http://www.treasurers.org/node/8445 Masterclass; Discounted cash flow, The Treasurer, October 2012] | ||
[[Category:Corporate_finance]] | |||
Revision as of 08:41, 11 May 2015
(DCF).
A process of discounting cash flows that are expected in the future to make them comparable in value with cash flows received today.
This 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.
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.
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.
Discounted cash flow techniques include Net Present Value (NPV) analysis and Internal Rate of Return (IRR) analysis.
See also
- CertFMM
- Discount rate
- Incremental cash flows
- Internal rate of return
- Investment appraisal
- Net present value
- Present value
- Time value of money
Other links
Masterclass; Discounted cash flow, The Treasurer, October 2012
