a technique used to estimate whether and when an initial capital investment will lead to future cash flows that exceed the cost of the capital - a sequence of cash flows simply converts all cash flows to today's dollars by multiplying cash flows received at time n by a factor 1/(1+discount rate)n which puts the cash flows into today's dollars.

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1. a technique used to estimate whether and when an initial capital investment will lead to future cash flows that exceed the cost of the capital - a sequence of cash flows simply converts all cash flows to today's dollars by multiplying cash flows received at time n by a factor 1/(1+discount rate)n which puts the cash flows into today's dollars.