Three reasons a dollar today beats a dollar tomorrow: (1) you can invest it now and earn a return, (2) inflation erodes purchasing power, (3) there is always risk you never receive the future payment.
§ 03
At an 8% discount rate, how much is $1,000 received in 10 years worth today?
§ 04
Time value of money is why DCF valuation works. Every future cash flow must be discounted to today's dollars. The further out the cash flow, the less it is worth now.
Five questions · AI feedback
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Sit with the ideas.
Inflation runs at 6% for a year while your savings account pays 2%. What happened to your purchasing power?
