The current value of a future cash flow is referred to as:
A) future value.
B) present value.
C) investment value.
D) discount rate.
E) cash flow rate.

Question

Quizplus · Accepted Answer

The current value of a future cash flow is the amount that would have to be invested today, at a certain rate of return, to equal the future cash flow. This concept is known as present value. Future value (A) refers to the value of an investment at a specific date in the future, assuming a certain rate of return. Investment value (C) is a more general term that can refer to a variety of ways of assessing the worth of an investment. Discount rate (D) is the rate at which future cash flows are discounted in order to calculate their present value. Cash flow rate (E) is not a common term in financial analysis.

The Current Value of a Future Cash Flow Is Referred