Something to keep in mind when determining an annuity’s present value is a concept called “time value of money.” With this concept, a sum of money is worth more now than in the future.

The formula for perpetual annuities takes a simpler form: Present Value = Payments / Interest Rate In the previous example, an infinite number of payments with a 2.4 percent inflation rate produce ...

So, if the initial investment is $1,000, and the present values in the first, second and final year are $952.38, $907.03 and $863.84, the net present value is equal to $1,723.25.

Thus, in the earlier example, the present value of $1.10 a year from now is $1.10 x .909, or $1.00. Fortunately, this math is automated in spreadsheet packages.

In this article we are going to estimate the intrinsic value of Cochlear Limited (ASX:COH) by estimating the company's future cash flows and discounting them to their present value. One way to achieve ...

G. William Dick, Determining the Present Value of Future Income: Selecting Income Growth Rates, The Journal of Risk and Insurance, Vol. 41, No. 4 (Dec., 1974), pp ...