Present value, also known as present discounted value, is the value on a given date of a payment or series of payments made at other times.
If the payments are in the future, they are discounted to reflect the time value of money and other factors such as investment risk. If they are in the past, their value is correspondingly enhanced to reflect that those payments have been (or could have been) earning interest in the intervening time. Present value calculations are widely used in business and economics to provide a means to compare cash flows at different times on a meaningful "like to like" basis.
Read more about Present Value: Background, Calculation, Choice of Interest Rate, Annuities, Perpetuities and Other Common Forms
Famous quotes containing the word present:
“It cannot be denied that for a society which has to create scarcity to save its members from starvation, to whom abundance spells disaster, and to whom unlimited energy means unlimited power for war and destruction, there is an ominous cloud in the distance though at present it be no bigger than a man’s hand.”
—Arthur Stanley Eddington (1882–1944)