Evaluation of Present Value
Journal Title: REST Journal on Emerging trends in Modelling and Manufacturing - Year 2016, Vol 2, Issue 3
Abstract
Moving cash flows across time is a fundamental tool in capital budgeting. This happens with some defined relationship with interest rate or discount rate decided by reserve bank or federal bank. But at the same time, normally price of all entities increase or in some exceptional cases decrease, which is known as inflation or deflation. It adds a dimension to the valuation of money. There is a standard relation between interest rates and inflation. Real interest rate is roughly equal to nominal interest rate minus inflation rate. So it is interesting to know the present value of any future cost or value. Various evaluating methods are already available to calculate present value of any future cost or value. However, all the evaluating methods have their own limitation. This document gives an alternative method of calculating present value.
Authors and Affiliations
Nirjhar Chakravorti
Keywords
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