Wednesday, September 2, 2009

Agile Benefits and DCF

In my musing on agile, I assert one advantage is that benefits come quicker and therefore are less susceptible to the risks of future uncertainties since the future is more near term.

The finance guys have a term for this: discounted cash flow, DCF.

So what is DCF and how does it work? In a word, the idea of a 'discount' is to value less a benefit in the future compared to a benefit in the present -- the financial equivalent to a bird in hand vs a bird in the bush.

The future is where uncertainties lurk.  It's just not a deflated dollar; it's also market uncertainties, the varagies of customer delight, and competitive effects.

Below is a Slideshare presentation that gives you some pictures of how this works:
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