If you've studied any finance then chances are you're familiar with the concept of the time value of money. Quite simply this is the notion that a dollar received today is worth more than a dollar received tomorrow, or anytime in the future. The farther you go out into the future, the less that dollar is worth.
Nearly all of finance is based on this concept. A common way to value stocks, or frankly any investment that produces income, is to do what's called a discounted free cash flow analysis. Free cash flow is the cash that a company generates after paying for ongoing operations and maintaining its asset base. It's represents the cash generated that can either be extracted from the company or invested in value added activities without causing any disruptions to ongoing operations.
A discounted free cash flow analysis looks at the free cash flows generated by a company or ... Log in or subscribe to continue reading.
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