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Investment appraisal – Discounted cash flow techniques
The time value of money
Money received or paid today is worth more than the same sum
received or paid in the future, i.e. it has a time value. This occurs for
three reasons:
potential for earning interest/cost of finance
impact of inflation
effect of risk
Discounted cash flow (DCF) techniques take account of the time value
of money when appraising investments.
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