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Discounted Cash Flow Methods

In: Investment Appraisal

Author

Listed:
  • Uwe Götze

    (Technische Universität Chemnitz)

  • Deryl Northcott

    (The Auckland University of Technology)

  • Peter Schuster

    (Schmalkalden University of Applied Sciences)

Abstract

The discounted cash flow methods described in this chapter are classified as ‘dynamic’ investment appraisal methods, which, unlike the static methods described in Chap. 2 , explicitly consider more than one time period and acknowledge the time value of money. Investment projects can be described as streams of (expected) cash inflows and outflows over the whole course of their economic life, i.e. over different time periods. Methods described and discussed in this chapter are the net present value method, the annuity method, the internal rate of return method and the dynamic payback period method. All of them are subject to a set of assumptions that are also discussed in this part.

Suggested Citation

  • Uwe Götze & Deryl Northcott & Peter Schuster, 2015. "Discounted Cash Flow Methods," Springer Texts in Business and Economics, in: Investment Appraisal, edition 2, chapter 3, pages 47-83, Springer.
    • Handle: RePEc:spr:sptchp:978-3-662-45851-8_3
    DOI: 10.1007/978-3-662-45851-8_3
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