Present Value
This is the current value of a future payment or stream of payments. The present value is calculated by applying a discount (capitalization) rate to the future payment(s). The present value techniques form the cornerstone of business or equity interest valuations and are also referred to as the discounted cash flow method or the discounted earnings method. It is broadly used by organization and investors to establish the fair market value of a potential investment. It is extremely time-consuming to calculate current value manually, annuity tables, programmable calculators, and computer programs make the calculations simple and fast.