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IntermediateOptions, Derivatives & FinancePython

Run this module

cd "Discounted Cash Flow (DCF)"
python "dcf_calculator.py"

View source on GitHub

Discounted Cash Flow (DCF) Calculator

This tool calculates the present value of a series of future cash flows—the basic principle behind valuing businesses, real estate, projects, and stocks!

What is DCF?

  • DCF stands for Discounted Cash Flow.
  • It's a method of valuing an investment by summing its projected future cash flows, each reduced (discounted) for the time value of money.
  • Why discount? A dollar today is worth more than a dollar tomorrow!

Why Should I Care?

  • Bankers, investors, analysts, and even exam-takers use DCF every day.
  • Delivers a transparent, logical view of value, especially for stocks or projects.

How to Use

  1. Enter a list of cash flows for each future period.
  2. Enter a discount rate (your opportunity cost or target return, as a decimal).
  3. Call the discounted_cash_flow() function.

Example

from dcf_calculator import discounted_cash_flow
future_cash_flows = [1000, 1200, 1500, 2000]  # Four years of income
present_value = discounted_cash_flow(future_cash_flows, 0.08)  # 8% discount rate
print('Project Value:', present_value)

Where is DCF Used?

  • Stock valuation, M&A, business cases, real estate, capital budgeting, and more.

See also: Portfolio, Bond, and Option UTILS for more hands-on finance!

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