present value

The current value of one or more future cash payments that is discounted at an appropriate, market-based interest rate. Present value is a calculation that is used to value businesses or to measure the return on a capital investment. In the case of an investment, two techniques are used: present value of dividends (DDM) and present value of free cash flow to equity (FCFE). Another method used is present value of free cash flow to the firm (FCFF). Present value tables are widely published and help in the calculation of present value. Also called time value of money.