Discounted cash flow techniques - part 5
Taught by Nick Drape · AI tutor support included
You'll learn how to handle investment projects with non-annual cash flows—such as quarterly, six-monthly, or monthly periods—by calculating an adjusted discount rate.
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In this lesson
- 0:00 Non-annual cash flows and discount rates
- 0:40 Formula for calculating non-annual discount rates
- 1:20 Worked example: six-monthly cash flows
- 3:02 Summary of present value techniques
- 4:25 Perpetuities and perpetuity factor calculations
- 5:16 Non-annual discounting recap and application
About this lesson
This video shows you the formula to convert an annual discount rate into a non-annual rate, then walks through a worked example where a 10.25% annual cost of capital becomes a 5% six-monthly discount rate. This technique is essential for Performance Management and Financial Management papers when you need to discount cash flows that don't occur annually. The lesson also recaps key discounted cash flow methods: terminal value, present value of single cash flows, annuities, perpetuities, and how to handle advanced or delayed variations—giving you a complete toolkit for investment appraisal questions.
Duration: 6m
Transcript
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