19 August 2008
Mr. Vishnuagarwal, Go through this small example. Your dad, in his childhood could have watched a movie for 50 paise or a rupee. But now u can get only a candy for 50 paise. This is time value of money. As years go, the value of money will decrease, in proportion to the inflation rate. If u discount the cashflows with the discounting factor, ie inflation rate, u will get present value of money.
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