DISCOUNTED CASH FLOW

A dollar received
today is better than a
dollar received a year
from now. This
discounted cash flow
workbook will allow
you to evaluate the
present value of
future cash at your
desired discounted
rate.

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 order
to receive given amount of cash at a future date for a dollar
invested today. The determining of discount rate can be
benchmarked with risk free rate plus inflation rate. Risk free
rate is the treasury bills market rate which is referred as risk
free rate because it is government back investment, the
inflation is added to adjust the effect of eroding future purchase
value of the dollar. An alternative in determining the selection
discounting rate is applying the rate of return of similar
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 of
investments using weighted cost of capital, weighted cost of
capital is the average cost for the total capital of a company.
Weighted average cost of capital is usually applied by
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 discounted
cash inflow is a strong tool for evaluating projects, it suffers
shortfalls of garbage in garbage out. A small change in cash
flows can result into a distorted valuation of the project.
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 user
to plug in fixed cost and variable cost. The template calculates
the net inflow, discounts the inflows and calculates the total
present value of cash flows from beginning to the last low of
keyed in data. If there are no expenses identified and the
valuation is for the regular cash flow, the user should enter the
data on cash inflow column and the template will perform 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 today
by discounting cash inflows at a required rate of return.
Required rate of return is the rate of return a business owner
expects to earn from investments.

INITIAL OUTLAY/INVESTMENT
DISCOUNT RATE

DISCOUNTED CASH FLOW

$100.00
9%

FOR BUSINESS VALUATION/INVESTMENT

INCOME
Year

Cash Inflow

EXPENSES
Fixed Cost

Variable Cost

DISCOUNTED CASH FLOW

Cash Outflow

Net Cash
Inflow/Outflow

Present Value of Cash

flow

Cumulative Present
Value of Cash Inflow

Present Value

Net Present Value

$65,000.00

$50,000.00

$50,000.00

$15,000.00

$13,761.47

$13,761.47

$13,661.47

$11,491.01

$80,500.00

$50,000.00

$50,000.00

$30,500.00

$25,671.24

$39,432.71

$39,332.71

$33,097.98

$85,750.00

$50,000.00

$50,000.00

$35,750.00

$27,605.56

$67,038.27

$66,938.27

$56,333.03

$90,000.00

$55,000.00

$55,000.00

$35,000.00

$24,794.88

$91,833.15

$91,733.15

$77,202.38

$85,000.00

$65,000.00

$65,000.00

$20,000.00

$12,998.63

$104,831.78

$104,731.78

$88,143.07

$98,500.00

$70,000.00

$70,000.00

$28,500.00

$16,993.62

$121,825.40

$121,725.40

$102,446.26

$102,500.00

$70,000.00

$70,000.00

$32,500.00

$17,778.61

$139,604.01

$139,504.01

$117,410.16

$0.00

$0.00

$0.00

$139,604.01

$139,504.01

$117,410.16

$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

$117,410.16

19

$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

Page 2 of 3

INCOME
Year

Cash Inflow

EXPENSES
Fixed Cost

Variable Cost

DISCOUNTED CASH FLOW

Cash Outflow

Net Cash
Inflow/Outflow

Present Value of Cash

flow

Cumulative Present
Value of Cash Inflow

Present Value

Net Present Value

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

Page 3 of 3