A discounted cash flow (DCF) is a valuation method used to estimate the attractiveness of an investment opportunity.

DCF analysis uses future free cash flow projections and discounts them to arrive at a present value estimate, which is used to evaluate the potential for investment.

If the value arrived at through DCF analysis is higher than the current cost of the investment, the opportunity may be a good one.

Calculated as:

DCF is also known as the Discounted Cash Flows Model

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