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Capital & valuation
Time value of money
A dollar today is worth more than a dollar next year, because it can be invested. Future cash is discounted back to today at a rate that reflects that and the risk.
Owned by: AnalystTest band: Analyst
The formula
PV = Future value ÷ (1 + r)^n
In practice
Everything in valuation rests on this. If a decision involves cash at different times, compare present values, not raw totals.
More in capital & valuation
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