one year from now, any cash we have today should be worth 12% more.
the reverse is also true however, so any cash flow we get one year from now, is worth less today.
to get the present value, or today's value of the 2014 cash flow, we write equals, select the cash flow and then divide by 1 plus the required rate of return.
close the bracket and press tab.
based on our required rate of return, the $10,000 that we would receive next year, is worth $8,929 today.
as you can imagine, for the next cash flow, we divide the cash flow by the rate of return, twice, because it's two years from 