hi robert

chapter 4 (esp. p.333-8) of my "Valuation of Equity Securities"
(World Scientific, 2011) examines DCF models, including the history ... 

precisely what the Wikipedia source means by "modern economic terms"
is unclear ... but your intuition about farmland and buildings is
good ... for example, Pitts (2001, Accounting History) examines the contributions
of William Armstrong (1811-1896) who uses DCF to value mining
company issues and leases ... versions of the Institute of
Actuaries textbook, Sutton (1882, Todhunter 1901) modeled the
common stock price as a  perpetuity with a constant growth rate
which is quite 'modern' in form ... Lewin "Pensions and Insurance
Before 1880" (Tuckwell Press 2003) details the use of DCF
methods to value various securities and contracts going back
to ancient times ... Fisher and JB Williams definitely popularized the
use of these valuation methods but did not make seminal contributions

cheers ... GP



----- Original Message -----
From: "Robert Murphy" <[log in to unmask]>
To: [log in to unmask]
Sent: Wednesday, January 23, 2013 11:05:58 AM
Subject: [SHOE] Discounted Cash Flow analysis

Dear List, 


The Wikipedia entry on Discounted Cash Flow (DCF) analysis of equity prices makes it sound as if Irving Fisher pioneered the technique in 1930: 



"Following the stock market crash of 1929, discounted cash flow analysis gained popularity as a valuation method for stocks. Irving Fisher in his 1930 book "The Theory of Interest" and John Burr Williams's 1938 text 'The Theory of Investment Value' first formally expressed the DCF method in modern economic terms." 
( http://en.wikipedia.org/wiki/Discounted_cash_flow ) 


Yet surely accountants were able to value bonds using (what we would now call) present-value discounting centuries before this? And even less obvious assets (farmland, apartment buildings?) that would throw off a long stream of net income? 


Can anyone help me with the history of these techniques? 


Thanks, 
Bob Murphy