Super Finance Glossary
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Searched for Present value
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Present Value
Definition: The amount of cash today that is equivalent in value to a payment, or to a stream of payments, to be received in the future. To determine the present value, each future cash flow is multiplied by a present value factor. For example, if the opportunity cost of funds is 10%, the present value of $100 to be received in one year is $100 x [1/(1 + 0.10)] = $91.
Definition: The amount of cash today that is equivalent in value to a payment, or to a stream of payments, to be received in the future. To determine the present value, each future cash flow is multiplied by a present value factor. For example, if the opportunity cost of funds is 10%, the present value of $100 to be received in one year is $100 x [1/(1 + 0.10)] = $91.
Present Value Components Analysis
Definition: An analytical tool that establishes a base NPV for a project that can then be adjusted for the incremental NPV effect of separate elements of the project's overall potential sales.
Definition: An analytical tool that establishes a base NPV for a project that can then be adjusted for the incremental NPV effect of separate elements of the project's overall potential sales.
Present Value Factor
Definition: Factor used to calculate an estimate of the present value of an amount to be received in a future period. If the opportunity cost of funds is 10% over next year, the factor is [1/(1 + 0.10)].
Definition: Factor used to calculate an estimate of the present value of an amount to be received in a future period. If the opportunity cost of funds is 10% over next year, the factor is [1/(1 + 0.10)].
Present Value Index (PVI)
Definition: The ratio of the NPV of a project to the initial outlay required for it. The index is an efficiency measure for investment decisions under capital rationing.
Definition: The ratio of the NPV of a project to the initial outlay required for it. The index is an efficiency measure for investment decisions under capital rationing.
Present Value Of Growth Opportunities
Definition: Net present value (NPV) of investments the firm is expected to make in the future.
Definition: Net present value (NPV) of investments the firm is expected to make in the future.
