Assessment of the feasibility of discounted cash flows method in investment analysis

Abstract

The article presents a critical analysis of the expediency of discounting in the evaluation of long-term investment projects. Discounted cash flow is a common method of valuing investments that produce cash flows. Discounting the projected cash flows generated by an investment project during its operational stage is one of the basic evaluative principles of investment analysis. Evaluation of projects using discounting methods is a priori considered more objective since the influence of the time factor is taken into account when calculating integral indicators. The critical analysis carried out by the authors allows us to state the need for the selective use of discounting in investment analysis. The authors emphasize the fact of unjustified ignoring of static methods which do not involve discounting of certain cash flows elements within justifying the effectiveness of projects. The necessity of expanding the application of static evaluation methods in order to prevent the negative impact of the phenomenon of "investment myopia" is substantiated