The current worth of future money flows refers back to the quantity that might have to be invested right now with a view to obtain a specific amount sooner or later sooner or later – whether or not that’s one week, one yr, and even ten years from now. On this case, you’re in search of how a lot you would wish to pay right now with a view to obtain $80 on the finish of 10 years incomes 15% curiosity. To calculate this, you need to use the system PV = FV / (1 + r)^n the place PV is the current worth, FV is the long run worth (the $80), r is the speed of return (15%), and n is the variety of durations being thought of (10). Plugging these numbers into our equation yields: PV = 80/(1+0.15^10) = 38.48. So, you would wish to pay $38.48 right now to ensure that your funding develop over time and yield an anticipated return of $80 after 10 years with 15% curiosity compounded yearly.