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Discounted cash flow

Discounted cash flow Definition

In the field of finance, a discounted cash flow value of an investment (measured in terms of the cash you will put into and receive from it) adjusted for the time-value of money. The future cash flows must be discounted in order to express their present values in order to properly determine the value of a company or project under consideration as a whole.

The discounted cash flow for an investment is calculated by estimating the cash you will have to pay out and the cash you think you will receive back. The times that you expect to receive the payments must also be estimated. Each cash transaction must then be discounted by the opportunity cost of capital over the time between now and when you will pay or receive the cash.





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