Consider an investment that has cash flows of $600 for the first year and $500 for the next four years. If your opportunity cost is 10%, how much is this investment worth to you?
Discounted Cash Flow Model:
The discounted cash flow model (DCF) is a valuation method to determine how future cash flows are worth of today's dollars. Theoretically, this method will discount all expected cash flows at the investor's required rate of return.
