Discounted Cash Flow (DCF) Analysis

Discounted Cash Flow (DCF) analysis is a method used to estimate the value of an investment based on its expected future cash flows. It involves projecting the cash the investment will generate over time and then adjusting those amounts to today’s value using a discount rate, which reflects the risk and the time value of money. Essentially, DCF helps determine what future earnings are worth today, enabling investors to assess whether an investment is financially attractive. It’s a fundamental tool for valuing companies, projects, or assets by translating future potential into present value.