@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 ) which drives the value of Cash Discount over accounting period (usually one 1 year) is related to the present cash value : as:
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F \mbox{Discounted Cash Value} = P\frac{ \cdot (mbox{True Cash Value} }{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 .
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
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Economics / http://nafta.wiki/x/EwPrAgCash Discount
[ Weighted Average Cost of Capital (WACC) ]
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