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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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