ASSIGNMENT - CHAPTER 2: DISCOUNTED

CASH FLOW VALUATION

1. What is the discounted cash flow concept?
- The value of an asset in Discounted Cash Flow (DCF) valuation is the present
value of the asset's predicted cash flows. The core idea of DCF is that every asset has
an intrinsic value that can be determined based on its cash flow, growth, and risk
characteristics. Though the DCF technique is one of the three ways to valuation, it is
important to understand the principles of this method because it may be applied to the
other two approaches as well. The most often used standalone valuation methodology
is the DCF model.

2. Is discounted cash flow same as net present value (NPV)?

- The net present value and discounted cash flow analyses can be used together to help you
make an informed decision. However, they are not the same. The discounted cash flow analysis can
help you figure out how much future cash flows are worth now. After deducting beginning
expenditures, the Net Present Value calculates the net return on your investment.