What is DCF (Discounted Cash Flow)?
DCF is a valuation method that estimates the present value of a company based on projected future cash flows, discounted back at an appropriate rate.
Formula
DCF Value = ฮฃ [FCF_t รท (1 + WACC)^t] + Terminal Value รท (1 + WACC)^n
How to Interpret
DCF captures a company's fundamental earning power. Highly sensitive to growth rate and discount rate assumptions.
Typical Ranges
Use as a range (best/base/worst case), not a single number.