Definition: A valuation method that converts forecast future cash flows, including any terminal proceeds, into present value using an appropriate discount rate.
Example
An investor discounts five years of expected cash flows and the projected net sale proceeds to today's dollars.
Keep the distinction clear
The result depends on the timing, amount, and risk of the forecasts. A discount rate is not automatically the same as a capitalization rate.
Related terms
Present Value · Cash Flow · Capitalization Rate (Cap Rate)
Keep studying
References: OCC: commercial real estate lending
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