Present Value (PV) Basics….FormulaeKapil
Terms uses : PV = Present Value; A = Annuity; r = interest rate; g = growth rate; n = number of periods; CF = Cash Flow; “A bird in the hand is worth two in the bush” – Miguel de Cervantes If someone owes you 10,000/- , it is advantageous to get the money today If you get this money today:
–> You could earn interest and invest it and you will receive this quantity plus some other amount in the future.
–> You can use it to pay your debts and therefore, lower the interest amount paid on your debt.
–> Or you can spend it and enjoy it as you wish. More on Time Value of Money here…