Discounted cash flow calculations have been used in some form since money was first lent at interest in ancient times. As a method of asset valuation it has often been opposed to accounting book value, which is based on the amount paid for the asset. Following the stock market crash of 1929, discounted cash flow analysis gained popularity as a valuation method for stocks. Irving Fisher in his 1930 book The Theory of Interest and John Burr Williams’ 1938 text The Theory of Investment Value first formally expressed the Discounted Cash Flow method in modern economic terms. All future cash flows are estimated and discounted to give their present values – the sum of all future cash flows, both incoming and outgoing, is the net present value, which is taken as the value or price of the cash flows in question.
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