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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 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:
To calculate the discounted cash flow estimate the future cash flow of investors and then discount them back to the present value using the discounted cash flow calculator.
Consider an investment opportunity in a manufacturing company that projects annual cash flows as follows:
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:
\(P V = \frac{$ 100,000}{(1+0.15)^{1}}+\frac{$ 120,000}{(1+0.15)^{2}}+\frac{$ 150,000}{(1+0.15)^{3}}\)
\(PV = \frac{$100,000}{1.15} + \frac{$120,000}{(1.15)^2} + \frac{$150,000}{(1.15)^3}\)
\(P V \approx $ 86,956.52 + $ 89,820.69 + $ 98,267.72\)
\(P V \approx $ 275,045.93\)
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%.
No, yet these two concepts are closely related. DCf evaluates attractiveness based on future income and on the other side, NPV measures the difference between the present value of cash inflow and outflow.
The growth stage refers to the period during which a company experiences rapid expansion in profits, revenues, and market share by typically following the initial establishment phase.