EXPLAIN THE DISCOUNTED CASH FLOW METHOD.

DISCUSS THE ADVANTAGE AND

DISADVANTAGE OF USING THIS METHOD.

- The Discounted Cash Flow (DCF) method is a financial valuation technique

used to estimate the value of an investment or a project. It is based on the
principle that the value of cash flows generated by the investment in the
future is worth less than the same amount of cash flows received today.

Advantages of the DCF Method:

- Time value of money: The DCF method accounts for the time value of
money, recognizing that a dollar received in the future is worth less than a
dollar received today. This provides a more accurate assessment of the
investment's value.

- Comprehensive evaluation: The DCF method considers all expected future

cash flows and brings them to the present, allowing for a comprehensive
analysis of the investment's profitability and potential.

- Flexibility: The DCF method is flexible and can be applied to different types
of investments, including stocks, bonds, real estate, and business projects.