Merits of discount cash flow method:
The merits of discount cash flow method are as follows:
(i) Discounted cash flow technique take into account the time value of money conceptually it is better than other techniques such as pay-back or accounting rate of return.
(ii) The method takes into account directly the amount of expenses and revenues over the project’s life. In case of other methods simply their averages are taken.
(iii) The method automatically gives more weight to those money value which are nearer to the present period than those which are father from it. While in case of other methods, all money units are given the same weight which seems to be unrealistic.
(iv) The method makes possible comparison of projects requiring different capital outlays, having different lives and different timings of cash flows, at a particular moment of time because of discounting of all cash flows.
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