Discounted Cash Flow (DCF) analysis is a financial valuation method used to estimate the value of an investment based on its expected future cash flows, which are adjusted for the time value of money. This approach recognizes that a dollar received in the future is worth less than a dollar received today due to inflation and opportunity cost. DCF analysis is essential for determining fair market value, as it provides a detailed view of how much future cash flows are worth in today's terms, enabling informed investment decisions.
congrats on reading the definition of Discounted Cash Flow (DCF) Analysis. now let's actually learn it.