Present value of single cash flow is the procedure in which the future value of single cash flow is consider to "0" time horizon i.e on today. In other words, the value of cash inflow is calculated based on the value of the same in future.

This can be expressed in view of formula

PV = FV * (1 / (1+K)^n)

Where,

PV = Present Value

FV = Future Value

K= Interest

N = Number of years

For example,

Mr. X is receiving Rs 1,00,000 receivable after 6 years hence if the rate of discount if 6%.

Then PV = Rs.1,00,000 * ( 1/(1+.06)^6)

= Rs.1,00,000 * (0.705)

= Rs.70,500

Subscribe to:
Post Comments (Atom)

## 0 comments

Post a Comment