Present Value

• Present Value is the current value of a future amount.

• The amount to be invested today at a given interest rate over a

specified period to equal the future amount.
Present Value
• Present value states that an amount of money today is worth more than the same
amount in the future.
• In other words, present value shows that money received in the future is not worth
as much as an equal amount received today.
• Unspent money today could lose value in the future by an implied annual rate due
to inflation or the rate of return if the money was invested.
• Calculating present value involves assuming that a rate of return could be earned
on the funds over the period.