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DCF As the Wrong Tool

by Steven Kursh

While discounted cash flow (DCF) is and should remain the linchpin of the evaluation of the financial viability for software investments, it should not be used exclusively. In fact, for many software investments, DCF in isolation is the wrong tool for calculating ROI. The problems with DCF center on its simplicity and underlying assumptions. Three clear weaknesses are associated with using DCF as the only financial evaluation tool for software investments.

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DCF As the Wrong Tool 28 September 2005

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