nüüdiväärtus

Nüüdiväärtus, also known as present value, is a fundamental concept in finance and economics. It refers to the current worth of a future sum of money or stream of cash flows, given a specified rate of return. The core idea is that money available at the present time is worth more than the same amount in the future due to its potential earning capacity. This difference in value is accounted for through a process called discounting.

The calculation of nüüdiväärtus involves discounting future cash flows back to the present using a discount rate. This rate typically reflects the risk associated with the investment and the opportunity cost of capital. A higher discount rate implies that future cash flows are considered less valuable today, while a lower discount rate suggests they are worth more. The formula for calculating the present value of a single future sum is PV = FV / (1 + r)^n, where PV is the present value, FV is the future value, r is the discount rate, and n is the number of periods.

Nüüdiväärtus is widely used in investment appraisal, financial analysis, and valuation. For instance, it helps investors decide whether to undertake a project by comparing the present value of its expected future cash flows to the initial investment cost. If the net present value (NPV), which is the present value of all cash flows minus the initial investment, is positive, the project is generally considered financially viable. Similarly, it is crucial for valuing financial instruments like bonds and annuities.