Discounted cash flow - Revision history

Designing Buildings at 09:10, 8 January 2021

2021-01-08T09:10:23Z

← Older revision		Revision as of 09:10, 8 January 2021
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	However, with recent accounting scandals and inappropriate revenue calculations, discounted cash flow has increased in popularity since it gives investors a more transparent measure for gauging performance and it provides a good picture of the key drivers of share value. It is also a method that is not as likely to be manipulated by aggressive accounting practices and it provides an accurate stock value to investors.		However, with recent accounting scandals and inappropriate revenue calculations, discounted cash flow has increased in popularity since it gives investors a more transparent measure for gauging performance and it provides a good picture of the key drivers of share value. It is also a method that is not as likely to be manipulated by aggressive accounting practices and it provides an accurate stock value to investors.
		+
		+	= Other definitions =
		+
		+	[https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/749086/Project_Business_Case_2018.pdf Guide to developing the project business case, Better business cases: for better outcomes], published by HM Treasury in 2018, defines Discounted Cash Flow (DCF) as: ‘A technique for appraising investments. It reflects the principle that the value to an investor of a sum of money depends on when it is received.’

	= Related articles on Designing Buildings Wiki. =		= Related articles on Designing Buildings Wiki. =

Designing Buildings at 07:49, 7 November 2020

2020-11-07T07:49:05Z

← Older revision		Revision as of 07:49, 7 November 2020
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	* Residual valuation of land.		* Residual valuation of land.

−	[[Category:Client_procedures]] [[Category:Cost_/_business_planning]] [[Category:Property_development]]	+	[[Category:DCN_Definition]] [[Category:DCN_Guidance]] [[Category:Client_procedures]] [[Category:Cost_/_business_planning]] [[Category:Property_development]]

Designing Buildings at 11:47, 11 June 2019

2019-06-11T11:47:20Z

← Older revision		Revision as of 11:47, 11 June 2019
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	However, with recent accounting scandals and inappropriate revenue calculations, discounted cash flow has increased in popularity since it gives investors a more transparent measure for gauging performance and it provides a good picture of the key drivers of share value. It is also a method that is not as likely to be manipulated by aggressive accounting practices and it provides an accurate stock value to investors.		However, with recent accounting scandals and inappropriate revenue calculations, discounted cash flow has increased in popularity since it gives investors a more transparent measure for gauging performance and it provides a good picture of the key drivers of share value. It is also a method that is not as likely to be manipulated by aggressive accounting practices and it provides an accurate stock value to investors.

−	~~= Find out more =~~	+	= Related articles on Designing Buildings Wiki. =
−		+
−	=== Related articles on Designing Buildings Wiki. ===	+

	* Cash flow.		* Cash flow.
	* Discounting.		* Discounting.
	* Discount rate.		* Discount rate.
		+	* Gross development value.
	* Internal rate of return for property development.		* Internal rate of return for property development.
	* Net Present Value.		* Net Present Value.

Designing Buildings at 07:28, 20 June 2018

2018-06-20T07:28:59Z

← Older revision		Revision as of 07:28, 20 June 2018
Line 31:		Line 31:
	* Cash flow.		* Cash flow.
	* Discounting.		* Discounting.
		+	* Discount rate.
	* Internal rate of return for property development.		* Internal rate of return for property development.
	* Net Present Value.		* Net Present Value.

Editor at 17:10, 2 February 2016

2016-02-02T17:10:25Z

← Older revision		Revision as of 17:10, 2 February 2016
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−
	= Introduction =		= Introduction =

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	There are three elements in calculating discounted cash flow:		There are three elements in calculating discounted cash flow:
−	*The period of time used for the evaluation.	+
−	*An accurate estimation of the annual flows of cash that will occur during that time.	+	* The period of time used for the evaluation.
−	*The amount of money that could be earned if it was invested in something else of equivalent risk.	+	* An accurate estimation of the annual flows of cash that will occur during that time.
		+	* The amount of money that could be earned if it was invested in something else of equivalent risk.

	Very broadly, assessing the annual cash flow which is to be discounted involves:		Very broadly, assessing the annual cash flow which is to be discounted involves:
−	*Using the net income after tax, add on depreciation for the year.	+
−	*Subtract the change in working capital from the previous year.	+	* Using the net income after tax, add on depreciation for the year.
−	*Subtract the capital expenditures.	+	* Subtract the change in working capital from the previous year.
		+	* Subtract the capital expenditures.

	= Considerations =		= Considerations =
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	=== Related articles on Designing Buildings Wiki. ===		=== Related articles on Designing Buildings Wiki. ===
−	*Cash flow.
−	*Discounting.
−	*Internal rate of return for property development.
−	*Net Present Value.
−	*Property development finance.
−	*Residual valuation of land.

−	[[Category:Client_procedures]]	+	* Cash flow.
−	[[Category:Cost_/_business_planning]]	+	* Discounting.
−	[[Category:Property_development]]	+	* Internal rate of return for property development.
		+	* Net Present Value.
		+	* Outturn cost.
		+	* Property development finance.
		+	* Residual valuation of land.
		+
		+	[[Category:Client_procedures]] [[Category:Cost_/_business_planning]] [[Category:Property_development]]

Designing Buildings at 15:10, 19 November 2015

2015-11-19T15:10:46Z

← Older revision		Revision as of 15:10, 19 November 2015
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	=== Related articles on Designing Buildings Wiki. ===		=== Related articles on Designing Buildings Wiki. ===
	*Cash flow.		*Cash flow.
		+	*Discounting.
	*Internal rate of return for property development.		*Internal rate of return for property development.
	*Net Present Value.		*Net Present Value.

Designing Buildings at 15:09, 19 November 2015

2015-11-19T15:09:13Z

Designing Buildings: Created page with " = Introduction = The term ‘discounted cash flow’ (DCF) refers to a technique for valuing a business in light of its cash yields in the future. It is a form of analysis fre..."

2015-11-19T15:05:30Z

Created page with " = Introduction = The term ‘discounted cash flow’ (DCF) refers to a technique for valuing a business in light of its cash yields in the future. It is a form of analysis fre..."

New page

= Introduction =

The term ‘discounted cash flow’ (DCF) refers to a technique for valuing a business in light of its cash yields in the future. It is a form of analysis frequently used by people purchasing a business. The analysis values the business based on the value of all cash available to investors in the future. It is described as ‘discounted’ since the value of cash in the future is worth less than cash today (because of its reduced capacity for generating a return, such as interest, and because of inflation).

Discounted cash flow is a similar concept to the Internal Rate of Return (IRR) and Net Present Value (NPV).

= Calculating discounted cash flow =

There are three elements in calculating discounted cash flow:
*The period of time used for the evaluation.
*An accurate estimation of the annual flows of cash that will occur during that time.
*The amount of money that could be earned if it was invested in something else of equivalent risk.

Very broadly, assessing annual cash flow which is to be discounted involves:
*Using the net income after tax, add on depreciation for the year.
*Subtract the change in working capital from the previous year.
*Subtract the capital expenditures.

= Considerations =

Whilst discounted cash flow is a useful tool, it does have some drawbacks. In particular, small changes in the input values can result in a large change to the value of the company and it is more difficult to calculate than simply dividing the share price by earnings or sales. An accurate valuation using discounted cash flow relies on the owner’s ability to project future cash flow accurately which may lead to shortcomings. It is also is more suited to long-term investment than short-term investment, and investors should consider other valuations as well as discounted cash flow before making a decision.

However, with recent accounting scandals and inappropriate revenue calculations, discounted cash flow has increased in popularity since it gives investors a more transparent measure for gauging performance and it provides a good picture of the key drivers of share value. It is also a method that is not as likely to be manipulated by aggressive accounting practices and it provides an accurate stock value to investors.

= Find out more =

=== Related articles on Designing Buildings Wiki. ===
*Cash flow.
*Internal rate of return for property development.
*Net Present Value.
*Property development finance.
*Residual valuation of land.

[[Category:Client_procedures]]
[[Category:Cost_/_business_planning]]
[[Category:Property_development]]

← Older revision		Revision as of 15:09, 19 November 2015
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−

	= Introduction =		= Introduction =

−	The term ‘discounted cash flow’ (DCF) refers to a technique for valuing a business in ~~light~~ of its cash yields in the future. It is a form of analysis frequently used ~~by people~~ purchasing a business. The analysis values the business based on the value of all cash available to investors in the future. It is described as ‘discounted’ since the value of cash in the future is worth less than cash today (because of its reduced capacity for generating a return, such as interest, and because of inflation).	+	The term ‘discounted cash flow’ (DCF) refers to a technique for valuing a business in terms of its likely cash yields in the future. It is a form of analysis frequently used when purchasing a business. The analysis values the business based on the value of all cash available to investors in the future. It is described as ‘discounted’ since the value of cash in the future is worth less than cash today (because of its reduced capacity for generating a return, such as interest, and because of inflation).

−	Discounted cash flow is a similar concept to ~~the~~ Internal Rate of Return (IRR) and Net Present Value (NPV).	+	Discounted cash flow is a similar concept to Internal Rate of Return (IRR) and Net Present Value (NPV).

	= Calculating discounted cash flow =		= Calculating discounted cash flow =
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	*The amount of money that could be earned if it was invested in something else of equivalent risk.		*The amount of money that could be earned if it was invested in something else of equivalent risk.

−	Very broadly, assessing annual cash flow which is to be discounted involves:	+	Very broadly, assessing the annual cash flow which is to be discounted involves:
	*Using the net income after tax, add on depreciation for the year.		*Using the net income after tax, add on depreciation for the year.
	*Subtract the change in working capital from the previous year.		*Subtract the change in working capital from the previous year.
Line 21:		Line 20:
	= Considerations =		= Considerations =

−	Whilst discounted cash flow is a useful tool, it does have ~~some~~ drawbacks. In particular, small changes in ~~the~~ input values can result in a large ~~change to~~ the value of the company ~~and it is more difficult to calculate than simply dividing the share price by earnings or sales~~. An accurate valuation using discounted cash flow relies on the owner’s ability to project future cash flow accurately which ~~may lead to shortcomings~~. It is also is more suited to long-term investment than short-term investment, and investors should consider other valuations as well as discounted cash flow before making a decision.	+	Whilst discounted cash flow is a useful tool, it does have drawbacks. In particular, small changes in input values can result in large changes in the value of the company. An accurate valuation using discounted cash flow relies on the owner’s ability to project future cash flow accurately, which can prove difficult. It is also is more suited to long-term investment than short-term investment, and investors should consider other valuations as well as discounted cash flow before making a decision.

	However, with recent accounting scandals and inappropriate revenue calculations, discounted cash flow has increased in popularity since it gives investors a more transparent measure for gauging performance and it provides a good picture of the key drivers of share value. It is also a method that is not as likely to be manipulated by aggressive accounting practices and it provides an accurate stock value to investors.		However, with recent accounting scandals and inappropriate revenue calculations, discounted cash flow has increased in popularity since it gives investors a more transparent measure for gauging performance and it provides a good picture of the key drivers of share value. It is also a method that is not as likely to be manipulated by aggressive accounting practices and it provides an accurate stock value to investors.