Present value

Present value, also known as present discounted value, is a future amount of money that has been discounted to reflect its current value, as if it existed today. The present value is always less than or equal to the future value because money has interest-earning potential, a characteristic referred to as the time value of money. Time value can be described with the simplified phrase, “A dollar today is worth more than a dollar tomorrow”. Here, ‘worth more’ means that its value is greater.