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Define and describe present value of money and future value of money. How is the discount...

Define and describe present value of money and future value of money. How is the discount formula used with each?
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Answer #1

Present value is the concept that states an amount of money today is worth more than that same amount in the future. In other words, money received in the future is not worth as much as an equal amount received today. Receiving $1,000 today is worth more than $1,000 five years from now

Future value is the value of an asset at a specific date. It measures the nominal future sum of money that a given sum of money is "worth" at a specified time in the future assuming a certain interest rate, or more generally, rate of return; it is the present value multiplied by the accumulation function.

DISCOUNT FORMULA

NPV = F / [ (1 + r)^n ] where, PV = Present Value, F = Future payment (cash flow), r = Discount rate, n = the number of periods in the future.

Future value= P(1+i)^n

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