welcome to this article on discounted cash flow now this fits into my valuing ways to value a company that could be discounted cash flow alright and that's company with a five year life they all the whole of discounted cash flow forecast the cash flows for this company over the next five years all right into cash flow and I'm comfortable that I can say over the next five years so there's one two three four five years flows are 100 million 100 million this 100 million and 100 million all right in flex five years it's only in the last five years so it's worth tada five hundred million not so fast alright a hundred million in five years time year's time and the answer's no because these hundred millions and say well the company is worth five hundred million discounted cash flow so I'll make over the next five years will be ten million received in a year's time it's million received in two years time which million receive in three years time and million in a year's time you could be it's worth more to you than 100 million received in four or five years time reduce these future hundred millions cash flow and apply a little formula the interest rate and the number of slightly the first year's cash flow a year's time isn't worth quite as much as to reduce the second year's cash flow cash flow again not going to do more 0.75 and actually is cash flow by 0.68 received one year from now isn't worth as much a hundred million you'd rather in two years time isn't as valuable 100 million now have interest rates 10% it year's cash flow to more like eighty present value of those five years cash the value of those cash flows and the million five years consecutively it million shares each one is worth about after five years there's no point in forecasting individual cash flows years time so I'm just going to say I forecasting cash flows is hard alright years it radically changes the value you to be to get these cash flows out of the cash flows from this particular company million okay but valuing companies isn't value our companies or even individual discounted cash flow to generate one of the numbers that you need
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