ERR Discounting decisions

Reply to statement below in 100 words or more about ERR discounting decisions.

  • According to the ERR reading Discounting Decisions for Enterprises with fixed cost and low variable cost states information regarding Discounted Cash Flow (DCF). Ignoring the influence of the time value if the planning is short however, when the planning period is long, the discounted cash flow has to be used to estimate the Net Present Value. (HSU) Discounted Cash Flow is a valuation method that is used for estimating certain investment opportunities, it also uses future free cash flow and a discount to get to a present value estimation and evaluates the values for potential investment. When values are arrived through DCF and is higher than current cost of an investment the opportunity is good. (investopedia)

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