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The current worth of a future cash flow can be determined for a given rate of...

The current worth of a future cash flow can be determined for a given rate of return by calculating the present value of the cash flow involved.

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Expert Solution

Solution:

Present value of future cash flows means calculating the current value of whatever future income or revenue is expected to come as a returns from the business.

This helps in taking investment decisions by the valuation experts in making decisions whether to invest in a particular business or not understanding the future profitability of it.

Sometimes investment valuer's use this method to even compare between two business opportunities or an existing business firm going in order to take decision whether to continue or not.

This can be even used in taking expansion decisions for business. One gets the actual picture of business after making some strong investment in the business today.

Hence from business point of view, every business needs a futuristic view to be predicted before something is invested into it to prevent normal losses and hence present value method helps in measuring this future incomes.

ekkarill92 answered 2 years ago
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