Expert: Paul Henneman - 11/11/2009

Question
Hello, I don't know if you can help me or not on this, but I understand that to get to Present Value you have to discount cash flows. What is meant by "discounting"? Is it the opposite of compounding, so discounting would be if you have the end result (FV) and you want to get back to the present amount, or the value of it today, then is this where discounting comes into play? If you could clarify this term a bit more, that would be great! Thanks!!!

Answer
misskitty,

Thank you for your question!  I found the below webpage that explains the calculation and details of present value in a simple way, better than I could explain in the space allowed here:

http://www.expectationsinvesting.com/tutorial1.shtml

I hope that this helps! Please do not hesitate to follow up with me if I can be of any additional service,

Sincerely,
Paul Henneman
President
ValuEngine Inc
www.ValuEngine.com