ANNUAL PROFITABILITY EXPRESSED IN TERMS OF DCF

The Discounted Cash Flow technique has been widely adopted in industry as the preferred method of evaluating the profit earning potential of alternative projects when they are being selected for the investment of new capital. Business planners have accepted that a procedure which examines the forecast of the whole life of a project and derives an overall return on capital or a net present worth in actuarial terms, is a more accurate way of choosing between projects than a calculation of the profit/capital ratio in a selected year.