Join Jim Stice for an in-depth discussion in this video Use discounted cash flow on a car purchase, part of Finance Foundations: Business Valuation.
- Now, you and your family moved to Hong Kong in 1995.…- We did, we lived there for three years.…- So, did you buy a car while you were there?…- No, but we actually did some financial analysis…to determine whether we should buy a car.…- So, what kind of analysis?…- Basically, we did a Discounted Cash Flow Analysis, or DCF.…We forecasted the amount and timing of cash flows,…used an interest rate and estimated what a car…would be worth to us.…- So, I'll bet that was a fun family meeting.…Tell us what the numbers told you.…- Okay, well, I'll convert all numbers to U.S. dollars,…but of course the original analysis…was in Hong Kong dollars.…
- That's right.…- So we estimated that we would receive…about $1,300 in net annual savings in terms of…our high spending on public transportation costs…compared to the lower cost of operating an automobile,…the gas, the oil, the maintenance and so forth.…- You must have been spending a lot…on public transportation.…- Yeah, on weekends we like to take family trips…to see the sights in Hong Kong,…
Make sure to check out the Stice brothers' other accounting and finance courses to understand the other economic factors that impact your business.
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- Using discounted cash-flow analysis to estimate value
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