Today I bought 1500 shares of Solitron Devices (OTC:SODI) at $2.22/share with a $4.95 brokerage fee for a total of $3334.95 investment. For someone maintaining a small portfolio this is a large investment.
I promised a couple of readers a version of the DCF Spreadsheet I use to help evaluate long term picks. I decided to offer it to anyone who can use it, i.e. Mac users only. Remember, if you use the free DCF spreadsheet do not base any investment decisions solely on a spreadsheet.
Discounted Cash Flow is a way of estimating the current value of an investment in today’s dollars based on assumptions of future growth of cash flows discounted back to the present. This is a vital concept to understand for valuing long term investments, not just in stocks but Real estate, businesses, etc. Once you have determined the value for an investment you compare it to the current price to help you decide whether it is worth investing in. One can easily mislead oneself with the incorrect use of DCF.