Q. Show the Present Value of a Single Flow ?
Discounting or else Present Value of a Single Flow (Lump Sum):- We are able to determine the PV of a future cash flow using the formula:
PV = FV (1+i) ^{n}
Where FV = Future value of the preliminary flow in n years
PV= Present Value
i= Annual rate of interest
n = No. of years
Example: - Mr. X anticipate to have an amount of Rs. 1000 subsequent to one year what should be the amount he has to invest today if the bank if offering 10% interest rate?
PV = 1000 (1+.10) ^{1}
PV = Rs. 909.09