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Make use of this calculator to compute the discounted cash flow based on FCFF and EPS methods.

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Discounted Cash Flow Calculator calculates the discounted present value of future cash flow for a business, stock investment, house purchase, etc. It is more appropriate when future conditions are variable and there is slow terminal growth.

The discounted cash flow is used to analyze the desirability of an investment opportunity by considering projected future income. For evaluating the investment opportunities, range from **10% to 20%** reflecting the investor’s expected rate of return.

The discounted cash flow formula equals the sum of all discounted cash flow from the power of different time periods.

\(DCF = \frac{CF_1}{(1+r)^1} + \frac{CF_2}{(1+r)^2} + \frac{CF_3}{(1+r)^3} + \ldots + \frac{CF_n}{(1+r)^n}\)

**Where:**

- \(CF_1, CF_2, CF_3, \ldots, CF_n\) = Expected cash flows at different time periods e.g: year 1, year 2, …
- (r) = Discount rate represents the rate of return required by investors or the cost of capital.

- Year 1 = $100,000
- Year 2 = $120,000
- Year 3 = $150,000

**Formula:**

Given a discount rate of 15%, we'll use the discounted cash flow formula:

\(DCF = \frac{CF_1}{(1+r)^1} + \frac{CF_2}{(1+r)^2} + \frac{CF_3}{(1+r)^3} + \ldots + \frac{CF_n}{(1+r)^n}\)

**Substituting the values:**

\(P V = \frac{$ 100,000}{(1+0.15)^{1}}+\frac{$ 120,000}{(1+0.15)^{2}}+\frac{$ 150,000}{(1+0.15)^{3}}\)

\(PV = \frac{$100,000}{1.15} + \frac{$120,000}{(1.15)^2} + \frac{$150,000}{(1.15)^3}\)

- Year 1 Cash Flow: $100,000 / (1 + 0.15)^1 = $86,956.52
- Year 2 Cash Flow: $120,000 / (1 + 0.15)^2 = $89,820.69
- Year 3 Cash Flow: $150,000 / (1 + 0.15)^3 = $98,267.72

\(P V \approx $ 86,956.52 + $ 89,820.69 + $ 98,267.72\)

\(P V \approx $ 275,045.93\)

The DCF calculator simplifies this process, providing valuable insights to aid in investment decision-making. The present value of the investment opportunity is approximately $275,045.93 indicating a discount rate of 15%.

- Select the DCF method
- Put the values accordingly
- Press on calculate

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