discounted cash flow model1

8/10/2019 Discounted Cash Flow Model1

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DISCOUNTED CASH FLOW

Discounting rate is the level of return an investor desires

from investments.The selection of discounting rate is the

desired risk rate of return a person is willing to accept in orderto receive given amount of cash at a future date for a dollarinvested today. The determining of discount rate can bebenchmarked with risk free rate plus inflation rate. Risk free

rate is the treasury bills market rate which is referred as riskfree rate because it is government back investment, theinflation is added to adjust the effect of eroding future purchasevalue of the dollar. An alternative in determining the selection

Weighted cost of capital is widely used as the discounting

rate.Discount cash flow adjust estimates the amount to be

received from investments adjusted for the time value of

money. The purpose is to analysis the attractiveness ofinvestments using weighted cost of capital, weighted cost ofcapital is the average cost for the total capital of a company.

The cash inflow cannot be evaluated for infinity and

instead terminal values are used.This is because the infinity

cash inflows are not easy to estimate. Although discountedcash inflow is a strong tool for evaluating projects, it suffers

shortfalls of garbage in garbage out. A small change in cash

The discounted cash flow template allows the users to

plug in cash in flow and select the desired discounting

rate.For the purpose of evaluating business where the variable

and fixed cost can be determined, the template allows the userto plug in fixed cost and variable cost. The template calculatesthe net inflow, discounts the inflows and calculates the total

present value of cash flows from beginning to the last low ofkeyed in data. If there are no expenses identified and thevaluation is for the regular cash flow, the user should enter the

Discounted cash flows values the business worth today

based on the value of the money it will generate in future.The analysis tries to generate what the business is worth todayby discounting cash inflows at a required rate of return.

Required rate of return is the rate of return a business owner

A dollar received

today is better than a

dollar received a year

from now. This

discounted cash flowworkbook will allow

you to evaluate the

present value of

future cash at your

desired discounted

rate.


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$100.00

9%

FOR BUSINESS VALUATION/INVESTMENT

INCOME

Year Cash Inflow Fixed Cost Variable Cost Cash OutflowNet Cash

Inflow/Outflow

Present Value of Cash

flow

Cumulative Present

Value of Cash InflowPresent Value Net Present Value

1 $65,000.00 $50,000.00 $50,000.00 $15,000.00 $13,761.47 $13,761.47 $13,661.47 $11,491.01

2 $80,500.00 $50,000.00 $50,000.00 $30,500.00 $25,671.24 $39,432.71 $39,332.71 $33,097.98

3 $85,750.00 $50,000.00 $50,000.00 $35,750.00 $27,605.56 $67,038.27 $66,938.27 $56,333.03

4 $90,000.00 $55,000.00 $55,000.00 $35,000.00 $24,794.88 $91,833.15 $91,733.15 $77,202.38

5 $85,000.00 $65,000.00 $65,000.00 $20,000.00 $12,998.63 $104,831.78 $104,731.78 $88,143.07

6 $98,500.00 $70,000.00 $70,000.00 $28,500.00 $16,993.62 $121,825.40 $121,725.40 $102,446.26

7 $102,500.00 $70,000.00 $70,000.00 $32,500.00 $17,778.61 $139,604.01 $139,504.01 $117,410.16

8 $0.00 $0.00 $0.00 $139,604.01 $139,504.01 $117,410.16

9 $0.00 $0.00 $0.00 $139,604.01 $139,504.01 $117,410.16

10 $0.00 $0.00 $0.00 $139,604.01 $139,504.01 $117,410.16

11 $0.00 $0.00 $0.00 $139,604.01 $139,504.01 $117,410.16

12 $0.00 $0.00 $0.00 $139,604.01 $139,504.01 $117,410.16

13 $0.00 $0.00 $0.00 $139,604.01 $139,504.01 $117,410.16

14 $0.00 $0.00 $0.00 $139,604.01 $139,504.01 $117,410.16

15 $0.00 $0.00 $0.00 $139,604.01 $139,504.01 $117,410.16

16 $0.00 $0.00 $0.00 $139,604.01 $139,504.01 $117,410.16

17 $0.00 $0.00 $0.00 $139,604.01 $139,504.01 $117,410.16

18 $0.00 $0.00 $0.00 $139,604.01 $139,504.01 $117,410.1619 $0.00 $0.00 $0.00 $139,604.01 $139,504.01 $117,410.16

20 $0.00 $0.00 $0.00 $139,604.01 $139,504.01 $117,410.16

21 $0.00 $0.00 $0.00 $139,604.01 $139,504.01 $117,410.16

22 $0.00 $0.00 $0.00 $139,604.01 $139,504.01 $117,410.16

23 $0.00 $0.00 $0.00 $139,604.01 $139,504.01 $117,410.16

24 $0.00 $0.00 $0.00 $139,604.01 $139,504.01 $117,410.16

25 $0.00 $0.00 $0.00 $139,604.01 $139,504.01 $117,410.16

26 $0.00 $0.00 $0.00 $139,604.01 $139,504.01 $117,410.16

EXPENSES DISCOUNTED CASH FLOW

DISCOUNTED CASH FLOWINITIAL OUTLAY/INVESTMENT

DISCOUNT RATE

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INCOME

Year Cash Inflow Fixed Cost Variable Cost Cash OutflowNet Cash

Inflow/Outflow

Present Value of Cash

flow

Cumulative Present

Value of Cash InflowPresent Value Net Present Value

EXPENSES DISCOUNTED CASH FLOW

27 $0.00 $0.00 $0.00 $139,604.01 $139,504.01 $117,410.16

28 $0.00 $0.00 $0.00 $139,604.01 $139,504.01 $117,410.16

29 $0.00 $0.00 $0.00 $139,604.01 $139,504.01 $117,410.16

30 $0.00 $0.00 $0.00 $139,604.01 $139,504.01 $117,410.16

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discounted cash flow model1

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