So present-day value of Rs 10,000.00 is Rs 6805.83 Future Valueįuture Value is the amount of money that will grow over a period of time with simple or compounded interest. Let’s say that you have been promised by someone that he will give you 10,000.00 Rs 5 year from today and interest rate is 8% so no we want to know what the present value of 10,000.00 Rs which you will receive in future so, Here ‘CF’ is future cash flow, ‘r’ is a discounted rate of return and ‘n’ is the number of periods or years. With the help of present value, method investors calculate the present value of a firm’s expected cash flow to decide if a stock is worth investing in today or not. It is an indicator for investors that whatever money they will receive today can earn a return in the future. Present value is also called a discounted value. Present value provides us with an estimated amount to be spent today to have an investment worth a certain amount of money at a specific point in the future. It is one of the important concepts in finance and it is a basis for stock pricing, bond pricing, financial modeling, banking, and insurance, etc. Present value is nothing but how much the future sum of money worth today. It is important to calculate the time value of money so that the investor can distinguish between the worth of investment that offers them different returns at a different time.
It is a simple idea that whatever money received today is worth more than money to be received one year from now or any other future date.
Generally, both the Present Value vs Future Value concept is derived from the time value of money and its monetary concept use by business owners or investors every day. Present and future values are the terms that are used in the financial world to calculate the future and current net worth of money which we have today with us. Difference Between Present Value vs Future Value
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