Discounted Cash Flows

Discounted Cash Flows (DCF) is a financial method used to estimate the value of an investment based on its expected future cash flows. It considers how much those future cash flows are worth today by applying a discount rate, which accounts for factors like risk and inflation. Essentially, it helps investors determine if an investment is worth pursuing by comparing the present value of expected earnings to the initial cost. If the present value is higher than the cost, the investment may be considered profitable.