discounted cash flow analysis

DCF analysis An investment appraisal method that assesses the *net present value of future incremental *cash flows that would arise from the implementation of a decision. In acknowledgment of the *time value of money, future cash flows are *discounted to *present values by the use of an appropriate *cost of capital rate. Discounted cash flow (DCF) analysis is frequently used to assess *capital expenditure proposals. See also the *internal rate of return.

Auditor's dictionary. 2014.

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