Business Valuation – Discounted Cash Flow

The attractiveness of an opportunity to invest can be evaluated using the Discounted Cash Flow method. This analysis basically uses the future projections of free cash flow and arrives at a present, probable value by discounting them and hence, understanding the potential of the investment. The DCF method is one of the reliable ways to find out if an investment will give you good returns or if it will prove to be a loss for you in the long run. A DCF analysis can be read like this – if the value obtained in higher than the current cost, it is favorable.