Discounted Cash Flow
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4 Terms
What is Discounted Cash Flow?
Discounted Cash Flow (DCF) is a valuation method used to estimate the value of an investment based on its expected future cash flows, adjusted to their present value using a discount rate
Walk me through a DCF
What is FCFF?
How is FCFF calculated?
FCFF is calculated by starting with EBIT because it reflects operating performance independent of financing, subtracting taxes because they are a real cash outflow, adding back depreciation and amortization because they are non-cash expenses, subtracting capital expenditures because they are required reinvestment, and subtracting the change in non-cash working capital because cash tied up in operations is not available to investors.
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