Close X

Discounted Cash Flow

Discounted Cash Flow

  • Term

    Main definition

  • Discounted Cash Flow

    A valuation methodology which calculates the present value of a business based on all future cash flows expected from the business. After the expected cash flows are determined for a period of time, the residual value is determined for the business at the end of that period of time. Then the expected cash flows are discounted, usually based on a fixed percentage discount that is annually compounded. To determine the present value of the common equity of a firm using a discounted cash flow model, the expected future free cash flows available to common equity are discounted at a rate equal to the company's cost of equity.

Contact us Today

The Nick Yocca Law Firm is committed to answering your questions about business law and corporate compliance matters in Orange County.

We'll gladly discuss your case with you at your convenience. Contact us today to schedule an appointment.