### Formula

i

discount rate, or the interest rate at which the amount will be compounded each period

PV

present value at time=0

FV

future value at time=n

n

number of periods

i

discount rate, or the interest rate at which the amount will be compounded each period

PV

present value at time=0

FV

future value at time=n

n

number of periods

The current worth of a future sum of money or stream of cash flows given a specified rate of return. Future cash flows are discounted at the discount rate, and the higher the discount rate, the lower the present value of the future cash flows. Determining the appropriate discount rate is the key to properly valuing future cash flows, whether they be earnings or obligations.

PV

FV

n

i

Precision

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