Million receive din years time because i can’t be invested now to learn anything alright so money has a time value the sooner you get it the more it’s worth basically so cut to the chase what you need to do is reduce these future hundred millions back to the equivalent of today’s money call discounting Kandy those people take he’s out there.
who want to know the little formula that you use to do this and all sort of cut in and give you the numbers but the formula you use says what you should do is take each flow and apply a little formula that says basically you divide it by plus the n that is in the math video but r is the interest rate and the number of periods so i would divide the first years cash flow students received months time by point.
Then the second one divided by point squared. cubed and so nook if you do that this is just an introductory video remember to show the principles if you like if you do that you find you need to reduce rounding slightly the first years cash flow a little bit hundred million years time is worth quite as much as it’s only a few hundred million pounds now if interest rates temp sensor could read it now you’ve invested I know that then introduced the second-years cash flow around it slightly by.where these numbers come from that’s basically one over . squared Matthews out thereon the next year’s cash flow again not gonna do more than two decimal places you and actually is cash flow by an naught now the effect of this is as follows what you’re actually saying is that a hundred million received one year from now isn’t worth as much of a hundred million you rather have it no wit’s actually only worth roughly applying this kind of principles equally hundred million received in two years time isn’t as valuable a hundred million out of interest rate stem sent it is in theory of interest rates at zero but rarely our interest rate there close.
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