Running a discounted cash flow analysis of your query results

You can run a discounted cash flow analysis on your query results using QMF Analytics for TSO.

About this task

Discounted Cash Flow (DCF) analysis compares costs and expenditures on new projects or to see whether the internal rate of return on a project meets company standards.

You can also use DCF to calculate the net present value of a rate of return on your investment.

This procedure uses the Q.CASHFLOW sample table.

To run a discounted cash flow analysis:

Procedure

Start QMF for TSO.
Your QMF administrator can tell you how to start a QMF session and give you a user ID. Check with your QMF administrator if you have any questions about getting started with QMF.

From the QMF Home Panel, enter DISPLAY Q.CASHFLOW on the command line and press Enter.

QMF for TSO displays the query result as a multi-columned report.

Figure 1. Query Results

 REPORT           Q.CASHFLOW                       LINE 1      POS 1      79
                                                                           
                                                                           
                                                                           
        PERIOD        COSTS      REVENUE     CASHFLOW                      
   -----------  -----------  -----------  -----------                      
             1         -800            0         -800                      
             2         -600            0         -600                      
             3         -100          200          100                      
             4            0          400          400                      
             5            0          500          500                      
             6         -800          300         -500                      
             7            0          300          300                      
             8            0          200          200                      
             9         -200          300          100                      
            10            0          300          300                      
            11            0          300          300                      
            12         -100          400          300                      
                                                                           
                                                                           
 *** END ***                                                               




1=Help         2=            3=End       4=Print       5=Chart        6=Query
7=Backward     8=Forward     9=Form     10=Left       11=Right       12=     
OK, Q.CASHFLOW is displayed.
COMMAND ===>

Enter SHOW ANALYTICS on the command line and press Enter to start QMF Analytics for TSO.
Tab to Discounted Cash Flow in the Statistics section of the QMF Analytics for TSO Home panel and press Enter.
The Parameter Selection panel is displayed.

Create the specification for your analysis.

Set your parameters as shown in the following table.

You can enter column names manually or you can tab to the field and press the List function key (F4).

The List function opens a Column Selection window that lists all of the column names from the query result. To select a column from the Column Selection window, tab to the column name and press Enter. QMF Analytics for TSO adds the name to the Parameter Selection panel automatically.

Table 1. Parameter Settings for Discounted Cash Flow Analysis
Parameter	Setting
Specify the columns to analyze	CASHFLOW
Discount rate	Entering a value in this field is optional. For this exercise, enter `100`.
Chart Title	Enter a title for your chart in the Chart Title field or accept the default value of asterisk (). If you accept the default value of asterisk (), QMF Analytics for TSO creates a title based on the columns that you have selected. If you delete the asterisk (*) and leave this field blank, the analysis output will not include a title.

Optional: Press the Save function key (F5) to save the specification.
The specification is saved to the QMF database as an ANALYTIC object. In Save Command Prompt, you can enter object names manually or you can tab to the field and press the List function key (F4) to see all available objects in Analytic Object List.

Saving the specification to the database allows you to run your analysis directly from the QMF command line at a later time, without having to navigate to the QMF Analytics for TSO Home panel and reenter the parameters. Saving specifications makes sense if you plan on running the analysis frequently or multiple times.
Note: The global variable DSQEC_SESSGLV_SAV in QMF controls how the autosave for parameter settings works. For information about Global Variables, see Global Variable List in the QMF help.
Press the Run function key (F2) to run the Discounted Cash Flow analysis.
By default, the Discounted Cash Flow analysis window includes two views. The top portion of the window shows the Figures view and the bottom portion shows the Graph view.

Use the F9 function key to toggle between the figures-only , graph-only and the default view.

Figure 2. Discounted Cash Flow Analysis

You can change the values in the Cashflow column and rerun the analysis.

The value shown in the Discount Rate field shows the value that you specified on the Parameter Selection panel.

The value shown in the Payback Period field, tells you the last period the cash flow becomes positive or the period when you get your money back.

The value shown in the Double Life field, tells you the number of periods it would take to double a sum of money if you had invested the money at that rate of return.
Press the IRR function key (F10) to calculate the Internal Rate of Return.
Figure 3. Internal Rate of Return Analysis

IRR is a measurement for evaluating whether to proceed with a project or investment.

If the internal rate of return (IRR) on a project or investment is greater than the minimum required rate of return – the cost of capital – then the decision would generally be to go ahead with the project or investment. Conversely, if the IRR on a project or investment is lower than the cost of capital, then you might not want to proceed with the project or investment.

You can change the values in the Cashflow column and rerun the analysis.

Press the NPV function key (F11) to calculate the Net Present Value.

The NPV shows the difference between the present value of cash inflows and the present value of cash outflows.

Discounted Rate Screen — Figure 4. Discounted Cash Flow Net Present Value (NPV) analysis

You can use NPV to analyze the profitability of an investment or project. You can change the values in the Cashflow column and rerun the analysis.

Table 2. Additional functions available from the Discounted Cash Flow page. Additional functions available from the Discounted Cash Flow page
Function	Result	Usage notes
Help (F1)	Opens the online help for the Discounted Cash Flow results page.	The help describes the functions that are available from the Discounted Cash Flow page.
End (F3)	Returns you to the Parameter Selection panel.	The Parameter Selection contains the values from the last analysis run. You can change the settings and rerun the analysis.
Print (F4)	The Print dialog window is displayed.	You must have print capabilities configured in QMF in order to print analysis results.
Backward (F7)	Scrolls backward.
Forward (F8)	Scrolls backward.