Trying to understand the computation of DCF (discounted cash flows) and also reading that DCF analysis attempts to determine the value of an investment today, based on projections of how much money that investment will generate in the future - taken from investopedia.
May be this is a very basic question, but it is difficult to understand why cash flows are added in discounted cash flows formula. Cash Flow year1 unless all of it is given away as dividends or some way back to the investor is fed back to the business to generate cash flow 2 the next year. Similarly, cash flow 2 will get used to generate cash flow 3 and so on. So why does it make sense to add the discounted versions of each of these cash flows. By adding is the cash flow of the previous not getting added multiple times. Thanks
Submitted August 27, 2023 at 02:03AM by idea_max_7777 https://ift.tt/wDWHhPg
