Talk:Discounted cash flow

message: Would it be possible to add an example to this page?  After reading it's still kind of unclear.  Iflipti 04:29, 22 May 2005 (UTC)
thread_title: Comments

message: I have substantially re-written the article to include the entire DCF formula and a very simple example showing how DCF analysis is generally done and what it means.  Also, the original article limited the calculation of the discount factor to opportunity cost only, while not really discussing where opportunity cost numbers come from or what they really mean.  A discussion of risk factors (commonly used in real estate DCF) has been included.  The article has also been linked to the "real estate" category, where it is often referenced.
For further discussion: there appear to be several finance articles that all cover similar ground.  Among these are discounted cash flow, future value, present value, and net present value.  These subjects are all intimately related to one another (especially DCF and NPV), and should perhaps be collected together somehow.
Ertyqway
Thanks for the awesome article, this so saved me mega time in my capital costs class for engineering.
Ditto. Article is bangin'. Financial markets exam in two weeks. Keep up the good work
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I would disagree with merging DCF with NPV (although I note that the above suggestion does not specifically demand this, I just want to be clear). DCF is a much broader topic than NPV, and covers the basic concept of time value of money, which is relevant to a range of applications. One of these is NPV. 
NPV is a specific application of DCF analysis that is used to evaluate projects based on a pre-determined 'hurdle rate'. IRR and even Stern Stewart's Economic Value Added methodologies also implicitly use the DCF concept, while being distinct from NPV.
I would suggest that instead of merging DCF and NPV, perhaps merging present value and future value into NPV and linking to NPV and IRR in the DCF article would make sense. I believe this will make clear that these articles (and the ideas and methods they relate to) are conceptually and practically distinct, but intimately related.  —Preceding unsigned comment added by 139.149.31.232 (talk) 20:55, 15 September 2007 (UTC)
thread_title:  Article substantially revised on 21 APR 2006 

message: The claim "(1+i)^(-t) can of course also be expressed as exp(-it)" is only true in the limit
of t\rightarrow \infty, with i\rightarrow 0 such that i\times t remains constant, no?  In any other case it's an approximation.  —Preceding unsigned comment added by 68.165.65.171 (talk) 15:59, 15 February 2009 (UTC)
thread_title:  Mathematics 

message: Although there is a calculator in the external, i feel that it is not useful enough for people. First, the calculator has limited field. You can't select number of year you wish to project. Second, there is no way to enter the number of shares outstanding. Third, there is no chart. I would recommend adding this discounted cash flow calculator. What is others editor opinion?  —Preceding unsigned comment added by Calculus1985 (talk • contribs) 14:02, 1 November 2010 (UTC)
thread_title:  Discounted Cash Flow Calculator 

message: I hadnt heard of "DPV" before. Looking at its description, isnt DPV simply another name for NPV? Would it not be better to call it NPV rather than DPV to avoid confusion?
Second point, would it not be a good idea to provide an evaluation of the different methods of DCF? The standard textbook Principals Of Corporate Finance by Brearly (sp?) and Myers gives convincing reasons as to why NPV is the best method of DCF. 92.28.244.187 (talk) 16:53, 4 July 2011 (UTC)
thread_title:  "DPV" v. NPV confusion 

message: In the introduction: "the opposite process — taking cash flows and a price and inferring a discount rate, is called the yield." This is not sound right. Can somebody explain what's this about please?حيا (talk) 00:39, 21 January 2013 (UTC)
thread_title: Ambiguous Sentence

message: That section reads like a copy from a textbook. And the tone is not quite encyclopedic, such as the rhetorical question "But what about risk?", and first person "We assume ...". --Quest for Truth (talk) 10:24, 14 September 2015 (UTC)
thread_title:  Example DCF 

message: The paragraph
: Under normal circumstances, people entering into such transactions are risk-averse, that is to say that they are prepared to accept a lower expected return for the sake of avoiding risk. See Capital asset pricing model for a further discussion of this. For the sake of the example (and this is a gross simplification), let's assume that he values this particular risk at 5% per annum (we could perform a more precise probabilistic analysis of the risk, but that is beyond the scope of this article). Therefore, allowing for this risk, his expected return is now 9.0% per annum (the arithmetic is the same as above).
is unclear.  I don't understand against what I add/distract/compare the 5% "risk valuation".  The fact that the final calculation is "the same as above" hides the difference and makes the example not simpler but incomprehensible. 78.45.38.114 (talk) 18:10, 18 October 2015 (UTC)
replies: text: When investors and managers perform DCF analysis, the important thing is that the net present value of the decision after discounting all future cash flows at least be positive (more than zero).  If it is negative, that means that the investment decision would actually lose money even if it appears to generate a nominal profit.  For instance, if the expected sale price of John Doe's house in the example above was not $150,000 in three years, but $130,000 in three years or $150,000 in five years, then on the above assumptions buying the house would actually cause John to lose money in present-value terms (about $3,000 in the first case, and about $8,000 in the second). 
I don't understand how future price 130,000 gives loss of 3,000.
\frac{130000}{1.05^3} = 112299;
112299 - 100000 = 12299 \ne -3000.
95.132.143.157 (talk) 09:45, 7 November 2015 (UTC)
thread_title:  The risk allowance is unclear 

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thread_title:  External links modified 

message: THe content in the article is pertinent and relevant to the subject matter. However, in check out a few of the citation I noticed that one of the links, reference 5, is not working. Kukismss (talk) 15:12, 30 January 2019 (UTC)
thread_title: Article Evaluation

message: In the Discounted cash flows sub-section of the Mathematics we read:
<quote>
The discounted cash flow formula is derived from the future value formula for calculating the time value of money and compounding returns.
:DCF = \frac{CF_1}{(1+r)^1} + \frac{CF_2}{(1+r)^2} + \dotsb +
\frac{CF_n}{(1+r)^n}
:FV = DCF \cdot (1+r)^n
</quote>
but based on the Time_value_of_money#Formula it looks like the first formula in actually derived from the present value formula for calculating the time value of money, which is:
:  PV \ = \ \frac{FV}{(1+i)^n} 
and not future value formula for calculating the time value of money, which actually is the reverse of it:
:  FV   \ = \  PV \cdot (1+i)^n 
Am I missing/misunderstanding something here?
If the above assumption is correct and also to make it more clear which description applies to which of the two formulas, I propose to change the above fragment to:
<quote>
The discounted cash flow formula is derived from the present value formula for calculating the time value of money
:DCF = \frac{CF_1}{(1+r)^1} + \frac{CF_2}{(1+r)^2} + \dotsb +
\frac{CF_n}{(1+r)^n}
 and compounding returns:
:FV = DCF \cdot (1+r)^n.
</quote>
If there are no immediate objections to that, I will make the edit soon. In case there are any objections after the edit, then feel free to revert, but please take time to reply to that post with explanation why.
Marioosz (talk) 09:06, 4 October 2021 (UTC)
thread_title:  Confusion in the  '[[Discounted_cash_flow#Mathematics|Mathematics]]' section: should 'future value' be changed to 'present value'?