The discounted cash flow (DCF) analysis, in financial analysis, is a method used to value a security, project, company, or asset, that incorporates the time value of money.
Discounted cash flow analysis is widely used in investment finance, real estate development, corporate financial management, and patent valuation. Used in industry as early as the 1700s or 1800s, it was widely discussed in financial economics in the 1960s, and U.S. courts began employing the concept in the 1980s and 1990s.
Here, a spreadsheet valuation, uses Free cash flows to estimate stock's Fair Value and measure the sensitivity of WACC and Perpetual growth
Valuation using discounted cash flows
Valuation using discounted cash flows is a method of estimating the current value of a company based on projected future cash flows adjusted for the time value of money.
The cash flows are made up of those within the “explicit” forecast period, together with a continuing or terminal value that represents the cash flow stream after the forecast period.
In several contexts, DCF valuation is referred to as the "income approach".
Spreadsheet valuation, using free cash flows to estimate the stock's fair value, and displaying sensitivity to WACC and perpetuity growth (click on image to see at full size)