Discounted Cash Flow (DCF) analysis values an asset by projecting future cash flows and discounting them to present value using a required rate of return (discount rate). The model: forecast 5-10 years of free cash flow, add a terminal value, sum the discounted cash flows. Output: intrinsic value per share. Garbage in, garbage out — small changes in growth or discount rate assumptions dramatically change the output. DCF is most useful for businesses with predictable cash flows (utilities, consumer staples); less reliable for high-growth or cyclical businesses. Use multiple valuation approaches (DCF, multiples, comparable transactions) for triangulation.
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DCF Analysis
August 22, 2026 · Aditya Gupta
Investing
Related terms
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