Business, Legal & Accounting Glossary
A method of evaluating an investment by estimating future cash flows and taking into consideration the time value of money. also called capitalization of income.
Discounted cash flow analysis is a valuation tool analysts use to evaluate the attractiveness of investment opportunities. Discounted cash flow analysis projects the cash flows an investment will generate in future years, then applies a discount rate to the cash flow stream to derive a present value for the investment. The company’s weighted average cost of capital is the discount rate used in applying discounted cash flow analysis to stocks. A variation of discounted cash flow analysis sometimes used by equity analysts is the dividend discount model which uses dividends instead of cash flow. Discounted cash flow analysis is a powerful valuation tool but does have drawbacks. A major issue with discounted cash flow analysis is the difficulty of estimating future cash flows. Also, small input changes cause the discounted cash flow analysis to yield drastically different results.
You may want to do a thorough discounted cash flow analysis so that you know where your money is going.
The Discounted Cash Flow Analysis was the best way to analyze the value of the company and the cash flows.
Our discounted cash flow analysis was meant to help us and not hurt us and I tried to explain that to everyone.
DCF
capitalization of income
capitalization of income
required rate of return
present value
hurdle rate
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This glossary post was last updated: 29th October, 2021 | 0 Views.