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The main idea of DCF is that in Economics the value of cash today is higher than value of of cash tomorrow because immediate immediate cash is already in hand and can be invested in readily available low-risk investment market opportunities and assure a certain profit. While future cash may not happen at all or may be lower than returns from readily available low-risk investment.
The corresponding corresponding discount of the cash value over time is controlled by discount rate which Discount Rate (usually denoted as
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Investor normally would like to compare different investment opportunities with account of of how early money return and in what amount and give early returns more weight and as such comparing DCF rather than FCF.
DCF is normally used to calculate Net Present Value (NPV) to prioritise investment projects.
See also
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[ Profitability Index (PI) ] [ Net Present Value (NPV) ]
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