## 20. Building Discount Formulas

IN THIS CHAPTER

**Calculating the Present Value**

**Discounting Cash Flows**

**Calculating the Payback Period**

**Calculating the Internal Rate of Return**

**Case Study**

In Chapter 18, “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 17, “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 ...