Present value
Also called: PV, net present value, NPV, discount factor
What a future amount of money is worth today, found by discounting it at a rate that reflects the time value of money and risk.
Present value = future amount ÷ (1 + rate)^years. To value a series of cash flows, discount each one and add them. Net present value is the present value of the inflows minus the cost today; a positive NPV means an investment earns more than the discount rate.
Example
₹1,00,000 received in five years is worth about ₹62,100 today at a 10% discount rate.
Learn more in these lessons
- Present value and discountingHow do you work out what future money is worth today?
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