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Essay / Research Paper Abstract
This 4 page paper examined discounted cash flow as an investment tool and looks at it advantages and disadvantages compared to other tools. The bibliography cites 5 sources.
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4 pages (~225 words per page)
File: TS14_TEdiscsh.rtf
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Unformatted sample text from the term paper:
the emotions and whim of investors and stock prices reflecting popularity. One method that has been suggested as a superior method to that of the discounted cash flow. Empirical evidence
suggests that although an investment may have a short term volatility, in the long term it will bear a stronger relationships to the actual performance of the company and the
revenue it produces. The basis of discounted cash flow as an investment technique is that the value of an investment should be measured
by the value of the future revenue streams. In turn these future revenue streams need to be discounted as the single unit of currency tomorrow will not be worth the
same amount if it were in the investors hands today. Therefore, to calculate the real return on an investment the cash flow it produces needs to be discounted to bring
it into todays value. In many ways this is actually another acid test approach. Its financial basis allows the investor to compare
the value against other investment opportunities (Elliott et al, 1998). There is always a price to be paid whatever the individual decides
to do with their money, if it is chosen to invest it the cost is not having it to spend now, in effect this is Carl Marxs delayed satisfaction (Marx,
1983). If the calculation is to be conducted in order to assertion where the money is best the future value of the investment needs to be discounted against the relative
amount the same amount is worth today. That way the total amount to be gained from a ten year investment and the return from a one year investment may also
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