The present value of single amount means that if you receive a amount today it has more value as compared to the fact if you receive the same amount in sometime near future. For example this concept says that if someone receives $100 dollar today it is more valuable as compared to the same $1000 received from a year now. Present Value of a single account is a concept that can be used to find out the time value of money in a number of different applications. It also helps you to decide how much money to invest today to achieve your targeted revenue in somewhere in future. For example say a company ABC purchases a land for building a manufacturing unit. The owners are willing to sell the land on the present value of $160,000 for today however they will charge you $200,000 if you are going to pay for the land at the end of two years.
In order to calculate net present value of a single account you need to have cash amounts not the accrual amounts. In calculation of present value the future cash amounts are discounted in such a way that they reach at their value of current time. This is the reason that the calculation of present value is also called as discounted cash value technique. The other calculation involves in calculating the present value of the single account is the compounding of the interest. This means that the interest amount is reinvested in order to get more interest in the same way as the principle amount is invested.
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