20. Building Discount Formulas

In Chapter 19, “Building Investment Formulas,” you saw that investment calculations largely use the same time-value-of-money concepts as the loan calculations that you learned about in Chapter 18, “Building Loan Formulas.” The difference is the direction of the cash flows. For example, the present value of a loan is a positive cash flow because the money comes to you; the present value of an investment is a negative cash flow because the money goes out to the investment.

Discounting also fits into the time-value-of-money scheme, and you can see its relation to present value, ...

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