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| LaTeX Math Block | ||||
|---|---|---|---|---|
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\mbox{DCF}_i = \frac{\mbox{FCFCF}_{t_i}}{(1+r)^i} |
| LaTeX Math Block | ||||
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\mbox{DCF} = \sum_{i=1}^n \mbox{DCFCF}_i =
\frac{\mbox{FCFCF}_1}{(1+r)} + \frac{\mbox{CFFFF}_2}{(1+r)^2}
+ \frac{\mbox{FCFCF}_3}{(1+r)^3} + ... |
where
| total number of accounting periods | ||||||||
|---|---|---|---|---|---|---|---|---|---|
| running number of accounting period (usually 1 year) | ||||||||
| discount rate | ||||||||
| free cash flow Cash Flow generated during the | ||||||||
| discounted value of free cash flowCash Flow generated during the | ||||||||
| discounted value of total free cash flow flow generated generated over "n" accounting periods |
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DCF is used to calculate Net Present Value (NPV) to prioritise investment projects.
See also
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Economics / Money / Currency / Cash / Cash Flow
[ Investment / Financial Investment / Cash Discount ]
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