- To calculate present value, we discounted the
future value at the interest rate. The
calculation is thereforce termed a discounted
cash-flow(DCF) calculation, and the interest
rate is known as the discount rate.
- This is the basic principle of finance that a
dollar received today is more valuable than a
dollar received in the future. Why would an
investor choose to take the money today if he
had the choice between today and next year?
}. Money has time value because of interest rate,
risk, expected inflation.
