What is DCF, explain in detail?

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Accepted Answer

DCF stands for Discounted Cash Flow, a valuation method used to estimate the value of an investment based on its expected future cash flows.

DCF calculates the present value of expected future cash flows by discounting them back to their current value using a discount rate.
It takes into account the time value of money, as cash received in the future is worth less than cash received today.
DCF is commonly used in finance to value stocks, bonds, real estate, and other investments.
The formula for DCF is: DCF = CF1/(1+r)^1 + CF2/(1+r)^2 + ... + CFn/(1+r)^n, where CF is the cash flow for each period and r is the discount rate.
DCF analysis requires making assumptions about future cash flows, growth rates, and discount rates, which can impact the final valuation.

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