Getting Started With Discounted Cash Flows

DCF Homework

So do you want to get Buffett-like analysis skills? Here are two activities that can help you hone your ability to discount cash flows.

1. Explore Professor Damodaran's Web site. If you want to learn more advanced concepts and formulas about discounted cash flows, visit the Web site of Professor Aswath Damodaran at the NYU Stern School of Business. His site on valuation, corporate finance and investment offers lecture notes, tutorials, sample problems and worksheets that can help enhance your valuation abilities.

2. Practice with online calculators. Go to an online DCF calculator and practice making your own projections for real stocks with historical data. How do your estimates hold up? Here are a few online calculators of varying complexity:

• Future Value Calculator on TheStreet.com
• Present Value and Future Value (University of Illinois at Chicago)
• Various Financial Calculation Tips for Microsoft Excel (Eastern Illinois University)