The Timing of Costs and Benefits
Discounting
- Money can be invested
- If the investment rate is 20%, then
- $1 invested today will bring $1.20 next year
- So $1 received today is worth $1.20 received next year
- Or, $1.20 received next year is worth $1 today
- Or, $1 received next year is worth only $0.80 today