A dollar today is worth more than a dollar tomorrow . " PV Calculator "value" means that its value is greater . A dollar today is worth more than a dollar tomorrow , because the dollar can invest and make a day of interest, so that the cumulative total worth more than a dollar tomorrow . The interest can be compared to renting. As the rent is paid to a landlord by a tenant, not the ownership of the asset is transferred, PV Calculator the interest is paid to a lender to a borrower who has access to the money for a while before repay.
Allowing the borrower has access to money , the lender has sacrificed his authority over the money, and is compensated in the form of interest. The initial borrowings (current value) is less than the PV Calculator total amount paid to the lender. Present value calculations , and even calculate the future value are used for securities lending , mortgages , annuities, sinking funds , sustainability , bonds and more . . These calculations are used to make comparisons between cash flows do not occur sometimes simultaneously.
The idea is very similar to algebra, where the units of the variables must be PV Calculator compatible in order to compare or perform addition and subtraction , times dates must be compatible in order to make comparisons between the values or perform simple calculations. When deciding between projects in which to invest , the choice can be made by comparing the respective present values discounted at the same interest rate or rate of return . The project with the lowest current value PV Calculator, IEEE , it costs at least today , he should choose .
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