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Discounted cash flow analysis and investment decision

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How is discounted cash flow analysis used to make an investment decision?

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Solution Summary

The solution explains the use of discounted cash flow analysis for an investment decision.

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Capital budgeting has following characteristics:

The exchange of current funds for future benefits.
The funds are invested in long-term assets.
The future benefits will occur to the firm over a series of years.

Use of discounted cash flow as a criteria
It considers time value of money. Time literally is money - the value of the money you have now is not the same as it will be in the future and vice versa. It impacts business finance, consumer finance and government finance. Time value of ...

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