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Discuss how the concept of discounted cash flow analysis might be important to you either on...

Discuss how the concept of discounted cash flow analysis might be important to you either on a business or personal level.

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The discounted cash flows concept is based upon the time value of money. This implies that the value of money today is more than the value of money in future assuming inflationary trends.

On a business level the discounted cash flow concept is extremely useful for assessing capital projects. Under capital budgeting analysis the cash flows arising from projects are discounted and compared with its initial cost to determine whether a particular project should be undertaken.

The concept is also used on a personal level where it is used for decision making as regards retirement benefits and annuities arising from different Investments.

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