Current Value of money

Time Value Of Money

Current Value Of Future Payments

Current value of a cash flow. In other word, if you were given the future value amount of a cash flow, the cash flow's current  value is the amount you would need to invest today for the cash flow to reach its future value.

occasion cost rate is the rate of safe return that is given up to invest in an alternative investment with the potential for a greater return.

For example , assume that  EAGLE  company had the chance to invest in a safe investment with a four percent return over a period of time. If they chose an alternative investment, their chance cost is four percent, the rate that they would earn on the safe investment.

 If one of the securities that EAGLE Company is considering for purchase currently sells for $200, but the company believes that it has a present value of $205, EAGLE Company should invest because the price of the security is less than its present value.

Of the other hand, if the security cost is $205, ABC Company should not invest in it because the price of the security is more than the present value of the security.

However, if the price of the security was $200 and the present value of the security was $200,EAGLE Company should be indifferent as to whether to invest in the security . so , $200 is known as the faire value of the investment. The fair value of an investment, also known as the equilibrium value, is the price of a security in which investors are indifferent between selling or buying.