If you take a loan from the bank you will have to pay an interest. The amount you will have to pay at the end of every year to close the loan in say five or ten years is very clear in your mind.
But the opposit is not easily comprehended.
The term is the present value for a cashflow for a given period. The financial term for this calculation is called discounted cash flow. This calulates the present value for a cashflow (fixed or with varying growth) for a given number of period.
This calculation is usefull for calculating the present value of a company with certain future future projection of business.
I was searching for a reading about this material and I came across a very simple writeup on it and a calculator.
Please click below link to read:
Discounted Cashflow Calculator
I thought of sharing this link here.
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