Valuation using discounted cash flows

Valuation using discounted cash flows is a way of figuring out how much something is worth. It's like a game of "guess the price," but instead of just guessing, you use math. First, you figure out how much money (cash flow) you can get from the thing you're valuing in the future. Then, you factor in the time you'll need to wait for that money and how much it will be worth then (called the discount rate). Finally, you add up all the cash flows and discount them so that they reflect their value today. That gives you a value for the thing you're valuing.