Financial Mathematics
Discounted cash flow (DCF) is a financial valuation method used to estimate the value of an investment based on its expected future cash flows, 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 factors like inflation and opportunity costs. The DCF method is essential when evaluating investments that generate cash flows over time, such as perpetuities, as it helps determine their present value.
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