The value of an investment
is the present value of all expected future cash
flows  that is, cash flows discounted to present
value. This can be expressed as
V_{0}
= CF_{1}/(1+i)^{1} + CF_{2}/(1+i)^{2}
+ CF_{3} (1+i)^{3} + ...
+CF_{n}/(1+i)^{n} 
V_{0}
= CF_{n} / (1+i)^{n} 
V_{0
} 
= value of asset at time zero 
CF_{t} 
= cash flow expected at the end of year
t 
i 
= discount rate 
n 
= time period 
This method is widely used by business valuators
and has become accepted in many legal contexts. 
Example
How did the Desmond court
apply DCF? After settling on the expected cash
flows and the appropriate discount rate, the
Tax Court applied the DCF model, also known
as the "income" method. (More>>)
