Introduction to Discounting and Present Value

The video tutorial introduces the concepts of discounting and present value, explaining how the time value of money affects financial decisions. It discusses why immediate cash is often preferred over future cash due to opportunity costs and inflation. The tutorial highlights the importance of these concepts for businesses, especially in investment decisions, and provides a formula for calculating present value. It also covers how to determine discount factors based on interest rates and time, emphasizing their role in evaluating the real value of future cash flows.

Why might a business prefer to receive cash today rather than in the future?

In your own words, explain the opportunity cost associated with delaying cash flow.

What factors influence the discount rate used in present value calculations?