The Discounted Cash Flow Model: Concepts, Issues, and Applications
About this course
Developed for appraisers with varied appraisal backgrounds, this seminar focuses on the basic concepts and principles of discounted cash flow valuation and modeling. DCF modeling is a powerful tool when properly used and understood.
What you’ll learn
- Recognize the three categories of factors driving income property value.
- Explain why cash flows are discounted.
- Determine present values.
- Explain how the DCF model reflects how the market determines value.
- Understand the theoretical underpinnings of PV, NPV, and IRR.
- Make defensible choices of discount rates.
- Apply both blended and cash flow–specific discount rates to arrive at PV estimates.
- Explain the relationship between the discount rate(s) and the timing of expected cash flows.
- Recognize the unreliable nature of the occasional inaccurate investment forecast.
- Describe basic strategies to minimize the negative impacts of inaccurate investment forecasts.
Course curriculum
- Introduction
- Module 1: Property Value and the Discounted Cash Flow (DCF) Model
- Module 2: DCF Models - The Three Pillars and Their Uses
- Module 3: Understanding the Discount Rate
- Module 4: Adding Depth - Some Other Considerations in DCF Modeling
- Conclusion
Course Provider
Appraisal Institute (AI)
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