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Present Value Financial Glossary

What is it? Definition Value of future cash flows as if they were available today. A simple example is that an individual might be willing to receive $100 per year for the next ten years for a total of $1,000 as an alternative to receiving $600 (the present value of $1,000) today. The $600 is less than the total of $1,000, but it is a bird in the hand - and the investor doesnt have to wait for ten annual payments. Buying or selling a business is much the same way. What are you willing to pay or receive now for a company in exchange for its future cash flows?

Finance Term Definition Added By: Gabrielle

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