ECONOMICS

Detailed explanation-1: -Discounted cash flow (DCF) is an evaluation process used to determine the investment value on its future cash flows.

Detailed explanation-2: -A company’s cost of capital is simply the cost of money the company uses for financing. If a company only uses current liabilities and long-term debt to finance its operations, then it uses debt and the cost of capital is usually the interest rate on that debt. The cost of capital is also called the hurdle rate.

Detailed explanation-3: -Net present value (NPV) is a financial metric that seeks to capture the total value of an investment opportunity. The idea behind NPV is to project all of the future cash inflows and outflows associated with an investment, discount all those future cash flows to the present day, and then add them together.

Detailed explanation-4: -The cost of capital refers to the required return needed on a project or investment to make it worthwhile. The discount rate is the interest rate used to calculate the present value of future cash flows from a project or investment.