Discounted cash flow (DCF) analysis is a financial modeling technique used to value an

investment based on its expected future cash flows. The basic premise of DCF analysis is that a
dollar today is worth more than a dollar in the future because money can be invested and earn
interest. Therefore, future cash flows must be discounted to their present value in order to be
compared to current investments.

DCF analysis is a widely used valuation method in investment banking, private equity, and
corporate finance. It can be used to value a variety of assets, including companies, projects, and
securities.

If the NPV of an investment is positive, then the investment is considered to be undervalued

and may be a good investment opportunity. If the NPV is negative, then the investment is
considered to be overvalued and may not be a good investment opportunity.