Discounted Cash Flow (DCF)
Also called: DCF, discounted cash flow analysis, DCF model
A DCF values a business as the present value of the cash it will generate, discounted at a rate reflecting its risk. It's the most theoretically correct valuation method and the most sensitive to assumptions: shifting the discount rate or growth rate by one percentage point can move the answer by 30% or more. A DCF is best read as a test of what you must believe to justify a price, not as an oracle.
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