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Discounted cash flow (DCF) and net present value (NPV)
The big picture
Discounted cash flow (DCF) is a method to assess and compare the current and future values of an asset. DCFs are calculated to assess the future cash flows that could come from an investment opportunity. A DCF analysis is a valuation method used to estimate the attractiveness of an investment opportunity. The total incremental stream of future cash flows from a capital project is tested to assess the return it delivers to the investor. If this return exceeds the required, or hurdle, rate, the project is recommended on financial terms, and vice versa. The DCF analysis ...
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