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Discounted Cash Flow (DCF) Explained

Advanced Investing • 12 min

A Discounted Cash Flow (DCF) model tries to answer a genuinely hard question: what is a company actually worth today, based on all the cash it's expected to generate in the future? The core idea rests on the "time value of money": $100 handed to you today is worth more than $100 promised to you in five years, because you could invest today's $100 and grow it, and because a future promise carries risk it might not…

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