@wikipedia
A positive number (usually denoted as The return that could be earned per unit of time (usually one year) on an investment with similar risk, which is assumed constant over timeIt is a positive number (usually designated as "") showing how future cash value over period of time (usually one year) is related to the present cash value :| LaTeX Math Block |
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F = P \cdot (1+r)^t |
In other words it's equivalent to the interest rate in unit time
which can be potentially returned on the initial investment of cash .) which drives the value of Cash Discount as:
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\mbox{Discounted Cash Value} = \frac{ \mbox{True Cash Value} }{1+r} |
The word "discount" means that a cash flow today is more valuable than identical cash flow in future because a present cash can be invested immediately and begin earning returns at rate , while a future flow cannot.
The value of discount rate is set by the corporate investment policy but usually related to the market-determined Weighted Average Cost of Capital.
See also
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Economics / Cash Discount
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