Compute the present value if
The present value of a forthcoming amount of money or series of payments with a fixed rate of return is its present value (PV). The discount rate reduces the present value of future cash flows; the higher the discount rate, the lesser the present value of future cash flows. The key to properly valuing future cash flows, whether they be earnings or debt obligations, is determining the right discount rate. Calculating the present value entails assuming that a rate of return on the money may be produced during the time.
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