Basic mechanics of discounted cash flow and net present value


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HAVE you ever come across an investment proposal and was faced with the daunting task of evaluating its viability. While the simple method of adding and subtraction has always been adopted, there is actually a structured manner in which the evaluation can be undertaken using basic tools.

For the purpose of this article, I will discuss the simplified version of the discounted cash flow (DCF), net present value (NPV) and internal rate of return (IRR) that can be used for investment evaluation decision-making.

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