Discounted cash flow is a valuation approach that uses predicted future cash flows to determine the value of an investment. DCF analysis aims to determine the current value of an investment based on future forecasts of how much money it will earn.
Discounted cash flow (DCF) is a valuation method used to estimate the value of an investment based on its expected future cash flows. DCF analysis attempts to figure out the value of an investment today, based on projections of how much money it will generate in the future.
This applies to investment decisions of investors in companies or securities, such as acquiring a company, investing in a technology startup or buying a stock, and for business owners and managers looking to make capital budgeting or operating expenditures decisions such as opening a new factory, purchasing or leasing new equipment.