Publications
Publications
- August 1972 (Revised September 2000)
- HBS Case Collection
Introduction to Accumulated Value, Present Value, and Internal Rate of Return
Abstract
A simple, intuitive introduction to the usually-difficult topics of discounting and present value. While the mechanics of computing present value and internal rate of return are covered well, the emphasis is more about how to think about these concepts (for example, the earlier-the-better on the receipt of cash flows). Using concrete examples, it fosters an understanding of how various considerations influence present value (for instance, as the discount rate rises, the impact of cash flows further out in time is disproportionately diminished).
Keywords
Citation
Hammond, John S. "Introduction to Accumulated Value, Present Value, and Internal Rate of Return." Harvard Business School Background Note 173-003, August 1972. (Revised September 2000.)