cash flows over time." width="562" height="462" />Present discounted value is the discounted value of a future cash flow stream.
$$Present\; Value=\frac$CF$ is the cash flow.
$r$ is the interest rate.
cash flows over time." width="562" height="462" />
Time value of money implies that a dollar now is worth more than a dollar in the future because of its earning potential in the time between the present and the future. That current dollar can be deposited into an interest-bearing account or invested in some other asset to earn a rate of return.
Present value refers to the dollar value of a cash flow stream at this exact moment. This current valuation is normally used in the calculation of a future valuation of that cash flow stream.
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