Discounting


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Discounting

Calculating the present value of a future amount. Discounting is opposite to compounding.

Discounting

The act of determining the present value of future cash flows. Because money is subject to inflation and has the ability to earn interest, one dollar today is worth more than one dollar tomorrow. Discounting, then, is the act of determining how much less tomorrow's dollar is worth. For example, a bank may loan a sum of money and schedule repayments at $100 per month for 10 years. The bank may then discount the value of payments and determine exactly how much (in today's dollars) it will have received once the loan is paid off.

discounting

The appraisal method of computing the value of an income-producing property by calculating the present value of anticipated cash flows.

References in periodicals archive ?
Further, the willing buyer-willing seller test mandated discounting the IRAs for (1) the income tax liability associated with their distributions and (2) their lack of marketability.
Proper planning can prevent majority blocks that would be precluded from discounting.
Toothpaste is an everyday necessity, so less discounting is needed, while furniture costs more.