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Discounted cash flow (DCF) is a valuation method used to estimate the value of an investment based on its future cash flows. The idea is that money today is worth more than the same amount in the future due to its earning potential.
In the DCF method, you estimate future cash flows and then discount them back to the present day using a discount rate, typically the weighted average cost of capital. This gives you an estimate of what the investment is worth today. DCF analysis can be complex and based on various assumptions, so it's important to use it as one tool in a suite of valuation methods.
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