10-13-2006, 03:25 AM
i didnt get ur question , but it might help u.
DCF is an techniqueof investment appraisal.
before this technique we hav techniques like Accounting rate of return ARR, pay back period, but one the major problems with these techniques are that they forget thetime value of money.
and this was coped by DCF method of capital investment.
in this we brings our future cash flows( which arises due to our present capital investment) itno thier present values( since we r going to invest now not in future)and then we compare our inflows with outflows , excluding the fixed and sunk costs, and check the viability of our investment.
DCF is divided into two methods,
Net present Values.
Internal rate of return.
Basic assumptions are,
1, what we are investing is in period '0' i.e. at NOW, not in future
2. all profits will be at the end of any year
3 if any cash flow occurs in the begning of the period then it will be assumed in the end of previous year.
4. Only relevant cash flows are taken into account in this technique
DCF is an techniqueof investment appraisal.
before this technique we hav techniques like Accounting rate of return ARR, pay back period, but one the major problems with these techniques are that they forget thetime value of money.
and this was coped by DCF method of capital investment.
in this we brings our future cash flows( which arises due to our present capital investment) itno thier present values( since we r going to invest now not in future)and then we compare our inflows with outflows , excluding the fixed and sunk costs, and check the viability of our investment.
DCF is divided into two methods,
Net present Values.
Internal rate of return.
Basic assumptions are,
1, what we are investing is in period '0' i.e. at NOW, not in future
2. all profits will be at the end of any year
3 if any cash flow occurs in the begning of the period then it will be assumed in the end of previous year.
4. Only relevant cash flows are taken into account in this technique
