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Discount Rate
The Present Value of future money
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The value of future money can be calculated to present worth or present value with the "discount rate" as
P = F / (1 + i)n (1)
where
F = future cash flow (positive for receipts, negative for disbursements)
PV = present value
i = discount rate
n = number of interest periods
The factor "1 / (1 + i)n" is known as the "single payment present worth factor".
Present Value - Online Calculator
Example - Present Value
The present value of a future cash flow 1 in period 10 with a discount rate 5% can be calculated as
P = 1/ (1 + 5/100)10
= 0.61
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Related Topics
- Economics - Engineering economic concepts - cash flow diagrams, discount rate, internal rate of return - IRR, income taxes, inflation
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Related Documents
- Cash Flow Diagrams - Time and value of future money
- Discrete Compounding Formulas - Discrete compounding formulas with discrete payments
- Interest Formulas - Single cash flow formulas
- Interest Rate - The cost of money
- Internal Rate of Return - IRR - Internal Rate of Return - IRR - the project break-even interest rate
- Net Present Worth - NPW - of a Stream of Payments - Net Present Worth - NPW - or Value of a stream of payments
