Discounted cash flow

From Traderpedia

Definition:
A future cash flow, or stream of cash flows, which has been "valued" in terms of the present by applying some interest rate, generally on a compounded basis.


This is the principal of the time value of money which indicates that current cash is worth more than future cash because of things like inflation.

Discounted cash flows are how bonds and other fixed income types of securities are valued. This is done by applying some discount rate to a particular cashflow to determine a present value.