Discounted Cash Flow is a tool that can be used to determine whether an investment is worth investing in. It can be used when looking to invest in projects, assets, stocks or any investment that produces a cash flow.
The method of calculation is based on projected future cash flows discounted to take into account the time value of money. The time value of money operates under the assumption that £1 today is worth more than £1 in the future if money today can earn interest.
Receiving cash flow as cash after 1 year is not as valuable as getting the money today as it won’t have had the benefit of a year’s interest from investment so needs to be discounted in order to accurately reflect its current day value.
DCF= CF1/(1+r) + CF2/(1+r)2+ CF3/(1+r)3+....CFn/(1+r)n
DCF = Discounted Cash Flow
CFn = Projected cash flow where n=year (1,2...n)
r = Discount rate (e.g. a rate of 5% gives r=0.05)
Discounted Cash Flow works by calculating the present value of an investment using discounted projected future cash flows to determine whether the investment is worthwhile.
To use this method, the investor must be able to make reasonably accurate estimates regarding future cash flows and also be able to choose a discount rate that will accurately reflect the time value of money for the period that the investment will be in operation.
The present value of the discounted cash flow calculated will likely be higher or lower than the initial investment therefore providing the investor with a valuable measure regarding the profitability of moving forward with an investment project.
Invoice finance allows you to release cash quickly from your unpaid invoices.
As your lender, we can release up to 90% of your invoices within 24 hours. On payment of the invoice from your customers, we will then release the final amount minus any fees and charges. There are different types of invoice financing options available to businesses depending on the situation and the level of control they require in collecting unpaid invoices.
We are an invoice financing company who offer a solution whereby payments are collected on your behalf managed by our team of expert credit controllers so you can focus on running your business. Our Confidential Invoice Discounting solution is offered to businesses who want to maintain their own credit control processes, therefore this remains strictly confidential so your customers are unaware of our involvement.
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