Discounted cash flow estimates are only as accurate as the original estimates of profits,time,risk,and cost.

Question

Quizplus · Accepted Answer

This statement is true because discounted cash flow estimates rely heavily on the accuracy of the estimates of future cash flows, timing of those cash flows, risks associated with the investment, and cost of capital. If any of these original estimates are incorrect, the discounted cash flow estimate will not be accurate. Therefore, it is crucial to have accurate and reliable estimates for each of these factors to ensure a reliable discounted cash flow estimate.

Discounted Cash Flow Estimates Are Only as Accurate as the Original