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Summary:
Use inputs such as interest rate, payment amount,
number of payments, etc. to determine the net present value of these payments.
Net present value is the determination of how much a future value is worth
today. For example, if somebody promises to pay you $1000 one year from now, how
much would you accept today instead? perhaps you would take $975 today as
opposed to $1000 a year from now; then $975 is the net present value of that
$1000. This model takes into account more than just one future payment as well
as interest rates.
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