Present value
Today's worth of a future amount: money tomorrow is worth less than money today, and the discount rate sets the difference.
Formula
PV = \frac{CF_t}{(1 + r)^t}A cash flow of a period, the rate for that same period, and the period number. The rate and the flow must be in one currency and treat inflation the same way.
How to read the number
The foundation of any cash-flow valuation: amounts from different years are comparable only after being brought to one date.
When the metric lies
A nominal flow discounted at a real rate overstates the valuation. Mixing real and nominal is the most common error in a model.
Also known as: pv