Discounted Cash Flows

To calculate discounted cash flows (DCF), you need to forecast the future cash flows of a
company or a project and then discount them back to their present value using a
discount rate. The discount rate reflects the time value of money and the risk associated
with the cash flows.

Here is the formula for calculating the DCF of a single cash flow:

DCF = CF / (1 + r)^t

Where:

 CF is the future cash flow

 r is the discount rate
 t is the number of periods in the future that the cash flow is expected to occur

For example, if a company is expected to generate a cash flow of $100 one year from
now, and the discount rate is 10%, the DCF of that cash flow would be:

DCF = 100 / (1 + 0.1)^1 = $90.91

To calculate the DCF of a series of cash flows, you need to sum the DCF of each
individual cash flow. For example, if a company is expected to generate the following
cash flows: $100 in one year, $200 in two years, and $300 in three years, and the
discount rate is 10%, the DCF would be:

DCF = 100 / (1 + 0.1)^1 + 200 / (1 + 0.1)^2 + 300 / (1 + 0.1)^3 = $611.78