Present value (PV)

Example

Say company XYZ owes you $1,000, payable three years from now, and you discount at 8% a year. The present value is $1,000 ÷ 1.08³ ≈ $793.83. The same $1,000 due in ten years is worth only about $463.19 today, because the further away the cash, the more the discounting compounds.

Hypothetical numbers, for illustration only.