How Do Discounted Cash Flow (DCF) Methods Analyze Investment Decisions?
Discounted Cash Flow is deemed to be a form of appraisal based notions linked to the business's net worth that is grounded on the capability to regain forth all the cash flows the shareholders have invested in that business. Usually, the DCF method evaluates any investment decision making through weighing or calculating the possible present and future investment values. In so doing this, the exact quality worthiness of any investment prospect can be determined. For any project to be undertaken or be seen to be of good value, all its expected cash flows ought to surpass the capital invested. The Net Profit Value of a proposed investment is that summation of all present values of cash inflows less summation of cash outflows. If by chance an independent decision that entails more than two or more investment is undertaken, the investment which entails the highest Net Present Value is accepted. And in a case where only we have one potential investment, the venture can be taken if its Present Value of all the cash inflows outweighs cash out flow. Thus, the only tool used to in financial forecasts is Net Present Value.
What are Types of Factors Affecting the Role of Cost Analysis in Forecasting Present and Future Value for Decision Making?
Variable costs and fixed costs influence the role of cost analysis in decision-making processes. These types of costs do so merely because they are relevant costs. Variable and fixed costs usually give administrators visibility into venues, clients and traders that help in most of revenue generating businesses. For instances, under the fixed costs, salaries and capital investments impact the decision-making process. On the hand, increase in production cost, lighting bills and employees' salaries have a devastating effect on variable costs when it comes to decision making.
How Can Organizations Anticipate and Plan for Uncontrollable External Events Such As Weather?
All plans that can be put in place for the anticipation of uncontrollable external events shouldn't only be limited to natural disasters but should also cover other calamities such as loss of customers, suppliers, data, people and even hidden events deemed to be disruptive. Hence, highest connotation to any emergency planning should be part of any daily business work. A business can employ the following ways to curb any uncontrollable events that may include weather that may impact the smooth process of running a business negatively.
Training all the staff members on how to detect early the following impending signs of such calamities. Such training skills, knowledge and know how among the staff is key to curbing any calamity.
Making sure that there is in place an insurance policy that covers all possible losses that may result from uncontrollable external events.
Diebold, F. X. (1997). The past, present, and future of macroeconomic forecasting (No. w6290). National Bureau of Economic Research.
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