Some Special Cases Of Discounted Cash Flow Analysis

To finish our chapter, we look at three common cases involving discounted cash flow analysis. The first case involves investments that are primarily aimed at improving efficiency and thereby cutting costs. The second case we consider comes up when a firm is involved in submitting competitive bids. The third and final case arises in choosing between equipment options with different economic lives.

There are many other special cases we could consider, but these three are particularly important because problems similar to these are so common. Also, they illustrate some very diverse applications of cash flow analysis and DCF valuation.

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