How do I calculate DCF?
An example of an AI chatbot conversation about calculating discounted cash flow (DCF).
What is DCF and how do I calculate it?
DCF stands for Discounted Cash Flow. It's a valuation method used to estimate the value of an investment based on its expected future cash flows.
Can you explain the steps to calculate DCF?
Sure! The steps are: 1) Estimate future cash flows, 2) Determine the discount rate, 3) Calculate the present value of cash flows, and 4) Sum them up.
What formula do I use for the present value?
The formula is: PV = CF / (1 + r)^n, where PV is present value, CF is cash flow, r is the discount rate, and n is the year.
How do I choose the right discount rate?
The discount rate often reflects the investment's risk and can be based on the weighted average cost of capital (WACC) or required rate of return.
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