Present Value
The Present Value of money in the future
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The value of money in the future can be calculated to Present Value or Present Worth with the "discount rate" as
P = F / (1 + i)n (1)
where
F = future cash flow (positive for receipts, negative for disbursements)
P = 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".
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Example - Present Value
The present value of a future cash flow of 7 in period 10 with discount rate 5% (i = 0.05) can be calculated as
P = (7) / (1 + 0.05)10
= 4.30
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