5.8 : 现值和折现

Present value calculates the current value of a future amount of money, considering the discount rate.

Present value and discounting are used to evaluate investments, compare financial options, and decide on loans, savings, and business ventures.

The present value formula calculates today's value of a future sum by dividing it by one plus the discount rate, raised to the power of the number of years.

Meet food truck owner Alex, who plans to expand in five years and needs one hundred thousand dollars for the project.

Alex uses the present value formula to determine how much he should invest today to reach the one hundred thousand dollar target, considering an annual interest rate of five percent.

The present value calculates to approximately seventy-eight thousand three hundred fifty-three dollars. This means Alex needs to invest an amount equivalent to the present value today to accumulate the required funds for expansion in five years.

Understanding present value allows Alex to make informed decisions on investing current funds to meet future financial requirements efficiently.