Application of the Discounted Cash Flow Method to Assessment of the Business Investment Attractiveness

Abstract

This article considers the prospect of applying the discounted cash flow method to assessment of the attractiveness of Russian business for businessmen. The authors describe the importance of improving the national investment environment for international cooperation between Russia and other countries. The authors propose a clarified definition of the concept “investment attractiveness.” The article describes possibilities, advantages and drawbacks of applying the discounted cash flow (DCF) method to the business attractiveness assessment. The authors pay attention to the importance of improving country’s investment attractiveness, point to the issues of Russian assessment standards and propose methods of improving the business attractiveness assessment using the DCF method. The authors consider such method to be the most appropriate in terms of investment motives, since investors aim to achieve a financial benefit and purchase revenue that will be earned in future rather than tangible facilities. The DCF method is based on the fact that the measurement criterion for estimated business revenue that is taken into account is not the profit, but is the cash flow. The authors argue that it is appropriate to apply such method in case of assessment of the investment attractiveness of the companies undergoing the stage of sustainable economic development and having featured successful market performance over a long period of time.