The Discounted Cash Flow (DCF) model is an extensively employed financial valuation tool for evaluating companies in finance. It is designed to identify the value of a company by assessing the present value of its expected cash flows in the future. The DCF model is widely accepted as a method of evaluating a company's worth based on its ability to generate cash in the future. Thus, many investors, financial institutions, and analysts rely on this method for making investment decisions.

Thesis statement:

While the DCF model remains a reliable financial valuation tool, its accuracy depends on a range of variables, including the assumptions of future cash flows and the discount rate used.

Body:

The DCF model follows a process of predicting a company's future cash flows and then discounting them to their present value using a discount rate. The discount rate serves as an opportunity cost of investing in a company and factually reflects the time value of money. Finally, the present value of the cash flows is the estimated intrinsic value of the company.

For example, suppose a company is expected to generate a cash flow of $100,000 for the next five years; then, using a discount rate of 10%, the present value of these cash flows could be calculated as:

Year 1: $100,000 / (1 + 0.10)^1 = $90,909

Year 2: $100,000 / (1 + 0.10)^2 = $82,644

Year 3: $100,000 / (1 + 0.10)^3 = $74,862

Year 4: $100,000 / (1 + 0.10)^4 = $67,439

Year 5: $100,000 / (1 + 0.10)^5 = $60,339

The cumulative value of the present cash flows, $385,294, signifies the intrinsic value of the company derived from the DCF model.

The DCF model is lauded for providing a standard systematic approach in valuing companies. It helps to incorporate any influences of uncertainly and time in a company's worth through forecasting future cash flows and discounting them. This valuation style is effective for mature businesses with stable cash flows or growth-oriented companies that will become profitable soon.

However, the DCF model has limitations due to some factors, including future cash flow assumptions that can be challenging to estimate with certainty. The accuracy of the DCF model also relies on the discount rate used, which is sometimes vague and subjectively varies from analyst to analyst.

Conclusion:

In conclusion, despite the limitations, the DCF model remains a valuable and widely-utilized financial valuation tool that helps investors, financial institutions, and analysts decide and evaluate companies. The accuracy, however, depends on a range of variables, including the assumptions of future cash flows and the discount rate used.