Discounted Cash Flow (DCF)
Discounted Cash Flow (DCF) is a corporate finance valuation method that estimates the present value of an asset, project, or company by forecasting its expected future cash flows and discounting them at a specified rate. The approach rests on the premise that value equals the present value of future cash flows.
Example: A company evaluating a proposed equipment upgrade creates a DCF model that projects FCFF for five years, uses a 9% WACC, and calculates the present value of cash flows to determine whether the project’s value supports the investment.
💬 Comments