What is a Discounted Cash Flow (DCF) Model?

10/11/2020 | Oliver Stock, greenmatch AG
Tags: fimo cashflow

The DCF Model serves to determine the value of various assets and companies. The DFC Model is used in project financing and renewable energies to determine the value of wind, photovoltaic, hydro, and biomass plants.

How does a Discounted Cash Flow (DCF) Model work?

Future cash flows will be discounted from T0 onwards to determine the value at the time of the valuation date (T0). Thus, the current value, i.e., cash value, can be defined in future payments.

Fair value of money

The fair value is the reason that payment of CHF 100 has a higher value if it is received at T0 than if it is received at a later stage. The CHF 100 received at T0 has a higher value because you can invest it at an earlier stage, which yields interest earned. It constitutes one of the most vital investment calculation principles.

The DFC Model takes into account this fact and therefore offers a basis for calculating two key figures for the financing of renewable energy projects: the net present value (NPV) and the internal rate of return (IRR).

Will be explained in the video as well


About greenmatch

greenmatch is the leading web-based investment application for renewable energies. The highly flexible application models the complete financial project lifecycle of your wind, photovoltaic, hydro and biomass projects and optimizes your workflow. Its collaborative and integrative approach allows projects to be analyzed and executed more efficiently, comprehensibly and reliably. Our solutions empower project developers, investors and banks in making reliable decisions and in increasing the success of their transactions. greenmatch is an innovative model to limited traditional spreadsheet applications.

Request a trial

Do you like our blog?

Subscribe now