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Discounted cash flow (DCF) is a method to value a security, project, company, or asset based on the time value of money. Learn the main elements, history, mathematics, and applications of DCF analysis in finance and economics.
Net present value (NPV) is a way of measuring the value of an asset that has cashflow by adding up the present value of all the future cash flows. NPV takes into account the time value of money and the discount rate to evaluate and compare capital projects or financial products.
Learn the definition, history, and calculations of time value of money, which refers to the fact that receiving money now is better than later. Find formulas and examples for present value, future value, annuity, and perpetuity.
Learn how to value assets by comparing them to a peer group using market values and standardized multiples. Find out the advantages and disadvantages of this method, and the types of multiples used in different contexts.
Learn how to estimate the current value of a company based on projected future cash flows adjusted for the time value of money. See the basic formula, a worked example, and modifications for different contexts and sectors.
Terminal value is the present value of future cash flows beyond a projection period, based on a constant growth rate or an exit multiple. Learn how to calculate terminal value using two methods and compare their advantages and disadvantages.
Present value (PV) is the value of an expected income stream determined as of the date of valuation, discounted by the time value of money. Learn how to calculate PV using compound interest, simple interest, and different interest rates, and see examples and applications.
Discounting is a mechanism in finance that allows a debtor to delay payments to a creditor in exchange for a fee. The fee is based on the discount rate, which is the rate of return the creditor could earn on a similar investment. Learn how to calculate the present value and the discount factor of future cash flows.