Present Value

Present Value - 


 * In financial theory, present value is a sum of money today which would exactly replace a stream of payments from the past or from the future, based on an assumed discount (interest) rate or set of rates. If the interest rate is presumed to be 10 percent, a sum of $1000 today will be worth $1100 at the end of one year (10 percent of $1000 is $100). In that sense, $1000 is the present value of $1100 one year from now. The actual process depends on the period over which compounding takes place, but $1000 today would be worth $1100 in one year and $1210 in two years. The extra $10 in the second year is $10 in interest on the interest from the first year. Thus, with annual compounding, $1000 is the present value of $1210 at the end of two years. In law, there is often a prohibition against pre-trial interest. As a result, what is called “present value” in litigation is often a combination of past actual value, but future present value. In the true financial sense of “present value,” interest must be added to past losses and subtracted


 * From: http://www.umsl.edu/divisions/artscience/economics/ForensicEconomics/definitions.html


 * What Does Present Value - PV Mean?
 * 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.


 * Also referred to as "discounted value".


 * Investopedia explains Present Value - PV
 * This sounds a bit confusing, but it really isn't. The basis is that receiving $1,000 now is worth more than $1,000 five years from now, because if you got the money now, you could invest it and receive an additional return over the five years.


 * The calculation of discounted or present value is extremely important in many financial calculations. For example, net present value, bond yields, spot rates, and pension obligations all rely on the principle of discounted or present value. Learning ho to use a financial calculator to make present value calculations can help you decide whether you should accept a cash rebate, 0% financing on the purchase of a car or to pay points on a mortgage.


 * From: http://www.investopedia.com/terms/p/presentvalue.asp

Present value calculator: http://www.moneychimp.com/calculator/present_value_calculator.htm