DCF：Net Present Value Method

　　Objective：to focus decision makers on the initial investment amount that is required to purchase or invest in a capital asset that will yield returns in an amount > return on a management‘s designated hurdle rate.

　　Basis of Evaluation：NPV requires managers to evaluate the $ amount of return rather than % of return(for IRR)or years to recover principle(for payback methods)as a basis for screening investments.

　　Formula：

　　NPV=Discounted cash flow–Investment

　　Conclusion：NPV > 0，meaning PVFCF>initial cash outflow，then make investment.

　　Financial Analysis-Discounted Cash Flow(DCF)

　　DCF valuation methods are techniques that use time value of money concepts to measure the present value of cash flows expected from a project.

　　Rate used in DCF：

　　-Management may use a Weighted Avg.Cost of Capital(WACC)method，or

　　-Assign a target for new projects to meet，or

　　-Recommend that the discount rate be related to the risk

　　specific to the proposed project.If the proposed project

　　is similar in risk to ongoing projects of the company，

　　WACC is appropriate because it reflects the market‘s

　　assessment of the average risk of the company‘s projects.