Discounted Cash Flow (DCF) is a financial valuation method used to determine the value of an investment based on its expected future cash flows, which are discounted to reflect their present value. This technique takes into account the time value of money.
Discounting is the process of estimating the present value of an income stream by reducing expected cash flow to reflect the time value of money. It is the opposite of compounding, and mathematically, they are reciprocals.
The Internal Rate of Return (IRR) is a financial metric used to evaluate the profitability of potential investments or compare the expected profitability of different investments. It is the discount rate that makes the net present value (NPV) of all cash flows equal to zero in a discounted cash flow analysis.
Net Present Value (NPV) is a method of determining whether the expected performance of a proposed investment promises to be adequate by calculating the present value of expected future cash flows minus the initial investment cost.
Net Present Value (NPV) is a crucial financial metric used to evaluate the profitability of an investment. By assessing the present value of expected future cash flows, NPV helps investors and businesses make informed decisions.
