discounted cash flow

Investment appraisal technique that establishes the value of an investment by considering the value of the expected cash flow and the opportunity cost of the money invested. As money accruing in the future is worth less to a firm than money it has in the bank today, future cash flow is discounted to give a present value. The total present values minus total capital outlay provide the net present value; this figure will be positive if the investment justifies the opportunity cost.