Discounting Cash Flows

Projected Cash Flows

DCF starts with projected cash flows.

highlighted = computed this step

Projected cash flows

A DCF values an asset as the present value of the cash flows it is projected to produce. Here the projection is level free cash flow of $100.00 per year.

projected FCF=$100.00\text{projected FCF}=\$100.00
Projected cash flowsThe projected free cash flows are displayed as a timeline. 0123$100.00$100.00$100.00

Projection timeline

The timeline shows the projected free cash flow in year 1, year 2, and year 3.

FCF1=FCF2=FCF3=$100.00\text{FCF}_1=\text{FCF}_2=\text{FCF}_3=\$100.00

Projection note

The projection is an assumption you choose. The computed DCF value later is only a value under those stated assumptions.

projection is an assumption\text{projection is an assumption}