discounted cash flow

discounted cash flow
A technique or process for valuing a financial instrument by applying a discount rate (or a series of discount rates) to calculate a present value of each future interest and principal cash flow expected from a financial instrument. The sum of the market values of the cash flows is considered to be the value of the instrument. For financial instruments with readily available, current trade prices, this value is called the fair value and is used in lieu of a trade- or transaction-based market value. American Banker Glossary
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( DCF)
Future cash flows multiplied by discount factors to obtain present values. Bloomberg Financial Dictionary
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Future cash flows multiplied by discount factors to obtain the present value. Exchange Handbook Glossary

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discounted cash flow ˌdiscounted ˈcash flow noun [countable usually singular] ACCOUNTING
a way of finding out if a planned investment will be profitable by using a particular interest rate to calculate the present value of future income from the investment over time. The interest rate used is the present market rate to which is added an extra amount for the risk involved. If, using this rate, the investment will bring in more money than its current cost, it is considered worth making

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   Establishes the relative worth of a future investment project by assessing the expected cash flows from the project against its net present value. Cash flows in the future are discounted, or are estimated as worth less than current cash flows, because their real value will be eroded by inflation. Commonly used in valuing companies and as a component of equity valuation.

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discounted cash flow UK US noun [U] (ABBREVIATION DCF) FINANCE, ACCOUNTING
► the amount that an investment, company, project, etc. is worth now, based on calculating the amount you expect it will cost and earn in the future, then reducing this figure to represent its value now: »

One way of appraising projects is to use a method of discounting such as discounted cash flow (DCF) or net present value (NPV).

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discounted cash flow analysis/calculation/method

→ See also TIME VALUE OF MONEY(Cf. ↑time value of money)

Financial and business terms. 2012.

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