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Present value |
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Definition of Present valuePresent valueThe amount of cash today that is equivalent in value to a payment, or to a stream of payments, Present valueToday’s value of an investment that yields some future value Present ValueThe amount due on an obligation less any interest on that obligation that would
Related Terms:Adjusted present value (APV)The net present value analysis of an asset if financed solely by equity Net adjusted present valueThe adjusted present value minus the initial cost of an investment. Net present valueA discounted cash flow methodology that uses a required rate of net present value methoda process that uses the discounted Net present value (NPV)The present value of the expected future cash flows minus the cost. Net present value (NPV)A discounted cash flow technique used for investment appraisal that calculates the present value of future cash flows and deducts the initial capital investment. net present value (NPV)Equals the present value (PV) of a capital investment Net Present Value (NPV)The present value of all future cash inflows minus the present value net present value (NPV)the difference between the present values of all cash inflows and outflows for an investment project net present value (NPV)present value of cash flows minus initial investment. Net Present Value (NPV) MethodA method of ranking investment proposals. NPV is equal to the present value of the future returns, discounted at the marginal cost of capital, minus the present value of the cost of the investment. Net present value of future investmentsThe present value of the total sum of NPVs expected to result from Net present value of growth opportunitiesA model valuing a firm in which net present value of new Net present value ruleAn investment is worth making if it has a positive NPV. Projects with negative NPVs NPV (net present value of cash flows)Same as PV, but usually includes a subtraction for an initial cash outlay. Present value factorFactor used to calculate an estimate of the present value of an amount to be received in present value indexsee profitability index Present value of growth opportunities (NPV)Net present value of investments the firm is expected to make present value of growth opportunities (PVGO)Net present value of a firm’s future investments. present value (PV)This amount is calculated by discounting the future Present Value (PV)The dollar value at the present time (year zero) of a single cash present value (PV)the amount that one or more future cash present value (PV)value today of a future cash flow. Present Value (PV)The value now of a future receipt or stream of receipts, calculated using a specified interest rate. Present Value (PV)Are equity instruments that take no security against assets, have flexible terms of repayment and pay fixed or floating dividends. PV (present value of cash flows)the value in today’s dollars of cash flows that occur in different time periods. ADF (annuity discount factor)the present value of a finite stream of cash flows for every beginning $1 of cash flow. Annuity factorpresent value of $1 paid for each of t periods. annuity factorpresent value of an annuity of $1 per period. capital budgetingRefers generally to analysis procedures for ranking capital investment analysisRefers to various techniques and procedures Capitalization RateA discount rate used to find the present value of a series of future cash receipts. Sometimes called discount rate. CapitalizeIn Finance: to find the present value of a stream of cash flows. Cash value added (CVA)A method of investment appraisal that calculates the ratio of the net present value of an Continuous DiscountingThe process of calculating the present value of a stream of future Cost-benefit ratioThe net present value of an investment divided by the investment's initial cost. Also called Crossover rateThe return at which two alternative projects have the same net present value. Discount factorpresent value of $1 received at a stated future date. discount factorpresent value of a $1 future payment. discount ratethe rate of return on investment that would be required by a prudent investor to invest in an asset with a specific level risk. Also, a rate of return used to convert a monetary sum, payable or receivable in the future, into present value. Discount RateThe rate of interest used to calculate the present value of a stream discount ratethe rate of return used to discount future cash discount rateInterest rate used to compute present values of future cash flows. Discount RateA rate of return used to convert a monetary sum, payable or receivable in the future, into present value. Discounted cash flowA technique that determines the present value of future cash Discounted cash flow (DCF)Future cash flows multiplied by discount factors to obtain present values. Discounted cash flow (DCF)A method of investment appraisal that discounts future cash flows to present value using a discount rate, which is the risk-adjusted cost of capital. discounted cash flow (DCF)Refers to a capital investment analysis technique Discounted dividend model (DDM)A formula to estimate the intrinsic value of a firm by figuring the DiscountingCalculating the present value of a future amount. The process is opposite to compounding. DiscountingThe process of calculating the present value of a stream of future discountingthe process of reducing future cash flows to present value amounts DiscountingCalculating the present value of a future payment. DiscountingThe process of finding the present value of a series of future cash flows. Discounting is the reverse of compounding. dividend discount modelComputation of today’s stock price which states that share value equals the present value of all expected future dividends. Dividend discount model (DDM)A model for valuing the common stock of a company, based on the Dollar-weighted rate of returnAlso called the internal rate of return, the interest rate that will make the Economic incomeCash flow plus change in present value. Equivalent annual benefitThe equivalent annual annuity for the net present value of an investment project. Equivalent annual cash flowAnnuity with the same net present value as the company's proposed investment. equivalent annual costThe cost per period with the same present value as the cost of buying and operating a machine. Exchange riskThe variability of a firm's value that results from unexpected exchange rate changes or the Extraordinary positive valueA positive net present value. Fisher ratethe rate of return that equates the present values fractional interest discountthe combined discounts for lack of control and marketability. g the constant growth rate in cash flows or net income used in the ADF, Gordon model, or present value factor. Future valueThe value that a sum of money (the present value) earning Gain-on-Sale AccountingUp-front gain recognized from the securitization and sale of a pool Gordon modelpresent value of a perpetuity with growth. Internal rate of returnDollar-weighted rate of return. Discount rate at which net present value (NPV) Internal rate of returnThe rate of return at which the present value of a series of future Internal rate of return (IRR)A discounted cash flow technique used for investment appraisal that calculates the effective cost of capital that produces a net present value of zero from a series of future cash flows and an internal rate of return (IRR)The precise discount rate that makes the Internal Rate of Return (IRR)The discount rate that equates the present value of the net cash internal rate of return (IRR)the expected or actual rate of Intrinsic value of a firmThe present value of a firm's expected future net cash flows discounted by the Macaulay durationThe weighted-average term to maturity of the cash flows from the bond, where the Macaulay durationA widely used measure of price sensitivity to yield Multiple rates of returnMore than one rate of return from the same project that make the net present value Net advantage of refundingThe net present value of the savings from a refunding. Net advantage to leasingThe net present value of entering into a lease financing arrangement rather than NPVSee: Net present value. NPVSee net present value. Portfolio internal rate of returnThe rate of return computed by first determining the cash flows for all the PPF (periodic perpetuity factor)a generalization formula invented by Abrams that is the present value of regular but noncontiguous cash flows that have constant growth to perpetuity. Profitability indexThe present value of the future cash flows divided by the initial investment. Also called Profitability IndexA method for determining the profitability of an investment. It is profitability indexRatio of net present value to initial investment. profitability index (Pl)a ratio that compares the present value of net cash flows to the present value of the net investment Put-call parity relationshipThe relationship between the price of a put and the price of a call on the same PVSee present value. Residual ValueTypically estimated based on the present value of the after-tax cash flows expected to be earned after the forecast period. Sales-type LeaseLease accounting used by a manufacturer who is also a lessor. Up-front gross Value additivity principalPrevails when the value of a whole group of assets exactly equals the sum of the weighted-average cost of capitalWeighted means that the proportions of YieldThe interest rate that makes the present value of a stream of future payments associated with an asset equal to the current price of that asset. Also called yield to maturity. See also current yield. yield to maturityInterest rate for which the present value of the bond’s payments equals the price. Account ValueThe sum of all the interest options in your policy, including interest.
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