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How to Calculate the Present Value of Free Cash Flow

By Motley Fool Staff – Updated Apr 29, 2025 at 11:32PM

Key Points

  • Calculate the present value of each year's cash flow by dividing by (1 + discount rate)^number of years.
  • Sum all present values to find the total value of projected cash flows, which in this example is $326.
  • A 10% discount rate gives a fair valuation for selling a business based on projected cash flows.
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