Easy to Use Discounted Cash Flow CalculatorA discounted cash flow calculator is a tool regularly used to make business and financial investment decisions to validate the financial sense of an investment. The core principle is that money has a time value. A dollar today is worth more than a dollar next year. This is because if you receive that dollar now you can invest it and earn a return. The simplest way to do this would be to deposit it on account at a bank and earn interest some interest. The future value of a receipt is always worth less in today's terms because of this effect. For example, a dollar received in a years time would only be worth the equivalent of what you would need to invest right now to receive that amount in the future.
This typical calculator shows how the computation would work for an initial upfront investment, with some ongoing maintenance costs, and of course the necessary financial income streams to make it an investment worth considering. The cost of funding is an essential criteria in the discounted cash flow model. This is because the higher it is the better return you need If you would like to see how the cost of funding affects your return, then click on this discounted flows calculator link and try a few different interest rates. This model assumes that the cash flows occur at the year end. In more sophisticated models, the cash flows can occur any time, and the appropriate mid year discount factor is worked out accordingly. Top of Discounted Cash Flow Calculator Small Business Finance Tips home page |
