The Board of Directors of ABC Co Ltd has assigned you the task of analysing the...

The Board of Directors of ABC Co Ltd has assigned you the task of analysing the Discounted Cash
Flow (DCF) technique for appraising large investment decisions.
Write a report to them giving your observations.

Expert Solution

Discounting cash flow technique will be used in order to discount the cash flows associated with any project and provide them with the decision making criteria of accepting or rejecting the project be as discounting cash flows can be netted out in order to make a decision

I will be reporting them about present value of their cash flows in respect to that particular project and I will be also trying to ascertain the rate of growth in the cash flows and the risk factor which are associated with the Cash flows, so I will be trying to provide them with risk adjusted cash flows in order to have a better idea of overall cash flows which are associated with this project, so it can be helpful for the organisation in order to make a decision regarding acceptability or rejection of the project.

Discounted cash flow is completely based upon the present value concept of time value of money and it will be trying to to associate the depreciation in the value of money with the time and it will trying to discount the cash flows at present value in order to make a decision so it will help the organisation in decision making in respect to the particular project.

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