The use of a Discounted Cash Flow and Net Present Value accounting methods in business decisions

Feb 3rd, 2012
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DCF AND NPV METHOD WITH COMPUTATION OF PAYBACK The use of a Discounted Cash Flow and Net Present Value accounting methods in business decisions Many of the management capital budgeting decisions involve pursuing an investment in the hope of making a profit in the form of additional net cash flows. One of the tools used in this decision making process is the discounted cash flow method. The method recognizes the time value of money; it projects future free cash flows and discounts them using a weighted average cost of capital (WACC) or an internal rate of return (IRR) to arrive at a present value. A business owner makes a decision on a potential investment by conducting the following:

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