# What is Discounted Cash Flow (DCF) And How Do You Calculate It

Discounted cash flow (DCF) is a valuation method that estimates the present value of an investment based on its expected future cash flows, discounted at a specific rate.

**Why is discounted cash flow (DCF) important? **

Discounted cash flow (DCF) is important because it provides a more accurate valuation of an investment by considering the time value of money and future cash flows.

**An easy way to understand discounted cash flow (DCF) is:**

To think of it as estimating the value of an investment based on how much money it's expected to generate in the future, while considering the time value of money.