Present value lets us compare dollar values from different time periods.

Question

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Present value is a financial concept that allows us to compare the value of money at different points in time. It takes into account the time value of money, meaning that a dollar today is worth more than a dollar in the future due to factors such as inflation and the opportunity cost of investing that money elsewhere. Therefore, present value is a tool used to compare the purchasing power of money from different time periods by adjusting for these factors.

Present Value Lets Us Compare Dollar Values from Different Time