DCF (Discounted Cash Flow)

Discounted Cash Flow (DCF) is a valuation method used to estimate the value of an investment or business based on its expected future cash flows. It involves projecting the cash the asset will generate over time and then adjusting those amounts to their present value using a discount rate, which accounts for risk and the time value of money. Essentially, DCF asks: "How much are these future cash flows worth today?" It helps investors determine if an investment is worth pursuing by comparing its current price to its estimated intrinsic value, based on future earnings potential.