Discounted Cash Flow

It is the future value of anticipated cash receipts and expenditures on a specified date.

The future cash flows must be discounted in order to express their present values. This will accurately determine the value of a company as a whole.

In other words, it calculates the value of a future cash flow in terms of an equivalent value today.

For instance, Rs 100 a year from now is the same as Rs 90.909 today if one uses a discount rate of 10%. Rs 90.909 invested for one year at a rate of 10% will yield Rs 100.