25. 11. 2003Present value (PV) is the current value of a future sum of money or stream of cash flows.
How Do You Calculate Present Value?Present value is calculated using three data points: the expected future value, the interest rate that the money might earn between now and then if invested, and number of payment periods, such as one in the case of a one-year annual return that doesn't compound. With that information, you can calculate the present value using the formula: Present Value= FV(1+r)n where: FV=Future Value r=Rate of return n=Number of periods \begin{aligned} &\text{Present Value} = \dfrac{\text{FV}}{(1+r)^n}\\ &\textbf{where:}\\ &\text{FV} = \text{Future Value}\\ &r = \text{Rate of return}\\ &n = \text{Number of periods}\\ \end{aligned} Present Value=(1+r)nFVwhere:FV=Future Valuer=Rate of returnn=Number of periodsWhat Is an Example of Present Value?Say expect to receive a $5,000 lump sum payment five years from now. If the discount rate is 8.25%, you want to know what that payment will be worth today. So you calculate the PV: $5,000 ÷ (1 + 0.0825)5 = $3,363.80.Why Is Present Value Important?Present value is important because it allows an investor or a business executive to judge whether some future outcome will be worth making the investment today. It is also a good tool for choosing among potential investments, especially if they are expected to pay off at different times in the future.
Q, seventeenth letter of the modern alphabet. It corresponds to Semitic koph, which may derive from an earlier sign representing the eye of a needle, and to Greek koppa. In Semitic the sound represented by the letter was an unvoiced…
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