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Discounted Cash Flow

In finance, the discounted cash flow (or DCF) approach describes a method of valuing a project, company, or financial asset using the concepts of the time value of money. All future cash flows are estimated and discounted to give them a present value. The discount rate used is generally the appropriate cost of capital, and may incorporate judgments of the uncertainty (riskiness) of the future cash flows.

Discounted cash flow analysis is widely used in investment finance, real estate development, and corporate financial management.

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