I’m working on a Economics question and need guidance to help me study.
In finance, discounted cash flow (DCF) analysis is a common technique of placing value on a project or company. All of the future cash flows are projected and discounted by using cost of capital to determine their present values (PVs). Adding up all future cash flows, both incoming and outgoing, provides the net present value (NPV).
Respond to the following in a minimum of 175 words:
- Give an example of a situation where a building contractor may want to use the discounted cash flow (DCF) analysis method.
- Discuss a situation where a method to determine a project’s valuation, other than discounted cash flow (DCF) analysis, would be favorable.