What is discounted cash flow analysis and what role does it play in the financial decision...

What is discounted cash flow analysis and what role does it play in the financial decision making of a healthcare organization?

Expert Solution

Answer :

Meaning of discounted cash flow analysis :

Cash flow analysis as the name suggest , analyse an organisation's cash inflows and outflows.
it shows a company's cash flows during a definite period of time.
Discounted cash flow analysis shows the discounted value of all future cash inflows and outflows related to a particular item of asset or a project.
Discounted cash flow analysis is done generally to obtain net present value of an asset or a project.

Role of discounted cash flow analysis in decision making of Healthcare industry:

In Healthcare industries, many hospitals purchase machines and surgical equipments on lease or installments.
Discounted cash flow analysis can help to make a decision regarding whether to buy a machine or to take it on lease .
It helps in calculating the net present value of machine under both the options and to compare them for making the right decision.
In the similar way when a project is considered regarding opening new branches of an Hospital, discounted cash flow analysis can be used as a tool to obtain net present value of all the future cash inflows and outflows related to that project,
which helps the investors to take a decision regarding whether the project will be profitable or not, and whether the project should be considered or not.

~~~ please upvote. Thanx.

ekkarill92 answered 2 years ago

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