@wikipedia
A positive
number number (usually
designated denoted as
"") showing how future cash value in time ) which drives the value of Cash Discount over accounting period (usually 1 year) is related to the present cash value : as:
| LaTeX Math Block |
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mathblock |
F \mbox{Discounted Cash Value} = P\frac{ \cdot (mbox{True Cash Value} }{1+r)^t} |
The
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 and usually at higher rate than Weighted Average Cost of Capital with typical market inputs.
See also
...
Economics / Cash Discount
[ Weighted Average Cost of Capital (WACC) ]
