Present value

of money
Presented by:
Jaybien Mapusti
Markgil Opao
Lei Ashley Osicos
Kathlyn Jambalos
John Amiel Peregrin
What is present value?
Present value is the current value of a future sum of
money or stream of cash flows given a specified rate of
return.
Present value is the concept that states that an amount
of money today is worth more than that same amount in
the future. In other words, money received in the
future is not worth as much as an equal amount
received today.
Formula of Present value

PV = FV/ (1+r)n
where:
FV = Future Value
r = Rate of return
n = Number of periods​
Discounting
Discounting is the process of determining the present
value of a payment or a stream of payments that is to
be received in the future. Given the time value of
money, a dollar is worth more today than it would be
worth tomorrow. Discounting is the primary factor
used in pricing a stream of tomorrow's cash flows.
 Determination of the present value
involving stream of unequal payments
To determination of the present value involving stream of
unequal payments, each payment will have a different value
based on when it is received.
To calculate the present value, you need to discount each
payment to its present value using an appropriate discount
rate. The discount rate represents the rate of return or
interest rate that you could earn on an alternative
investment of similar risk.
 Determination of the present value involving
stream of equal payments
To calculate the present value of a stream of equal payments, you can use
the formula for the present value of an ordinary annuity. An annuity is a
series of equal payments made at regular intervals.

PV=PMT×[(1−(1+r)(−n)​/r]
Where PV is the present value, PMT is the payment amount per
period, r is the discount rate, and n is the number of periods.
 Determination of the present value of
perpetuity
The present value of a perpetuity is determined by simply dividing the
amount of the regular cash flows by the discount rate.

The formula for calculating the present value of a perpetuity is

PV = C / r
Where:
PV = Present Value
C = Cash Flow per period
r = Discount Rate
In this formula, the cash flow per period (C) remains constant and is
received or paid at regular intervals. The discount rate (r)
represents the rate of return or interest rate that is used to
discount the cash flows.

For example, if you have a perpetuity that pays $1,000 every year
and the discount rate is 5%, the present value would be:
PV = $1,000 / 0.05
PV = $20,000
So, the present value of the perpetuity would be $20,000.
 Computation of growth rates
To calculate the growth rate, take the current value and
subtract that from the previous value. Next, divide this
difference by the previous value and multiply by 100 to get a
percentage representation of the rate of growth.
THANK
YOU!