From the course: Excel: Financial Functions in Depth

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Using NPV to calculate a discounted cash flow (DCF)

Using NPV to calculate a discounted cash flow (DCF) - Microsoft Excel Tutorial

From the course: Excel: Financial Functions in Depth

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Using NPV to calculate a discounted cash flow (DCF)

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- [Instructor] Discounted cash flow or DCF is one of the most commonly used methods for finding the value of a company or another cash flowing asset. So sometimes we use a DCF method when we're trying to decide the value of an asset. For example, you might be considering purchasing a company or a large piece of equipment and want to know what the value of that asset is for you. Most of the time though, we use it to value a company, and that's what we're going to do in our example today. In order to use the DCF method to arrive at a value for the asset or the company, you need the following three pieces of information. You need to know the free cash flow to the firm or the information necessary to calculate this, you need the weighted average cost of capital, so we know how to calculate this because we did it in the previous movie, and you'll also need to make an assumption about the perpetuity growth rate. So we usually come up with something like 2% for how much our cash flow is…

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