Present value

Present values

But the present value, what does that mean?

Now, you might remember from previous videos that the book value of the assets in Ben's company are only 140,000! 20,000 of cash, 100,000 of inventory, 20,000 of... this is not equity, this is equipment I should call it.

That would have been the market value per share.

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This is the book value for a share.

What's the present value of 50 in 1 year?

Hopefully people will be watching this in the next millenia.

That is 100.

So that's fine.

42 million in adjusted dollars. That's minus payload, of course.

let me just scroll down so let's say that one year so today, one year so we figured out that 110 a year from now, its present value is equal to so the present value of 110 is equal to 104,76.

Well, we said let me do that in a different color.

Present value of 100 today is 100.

We'll now learn about what is arguably the most useful concept in finance and that is called the present value.

So that's where it comes from.

This is the book value.

Let's say that the market value we talked before that the book value per share of this company is 5.

And you immediately sells that stock that you don't even know, you sell the stock borrow from someone else.

'I make you a present of everything I've said as yet.'

One dollar is equivalent to 110 yen.

But that's just 1.02 divided by 1, which is just 100. 100 today.

And the notation is PV

Our price is considerably higher than the current market price.

Such a list does not exist.

Now, now.

Get out my virtual Tl 85.

This dollar would be 1.11 to the third.

So this is interesting.

So each of those shares is one 500 millionth of this equity.

Whenever you hear things like book value, and I've done a couple of videos on book value versus market value, but the book value is essentially what you have on your accounting books.

And then to get its present value, its value today, you divide that by 1.05 again.

So how do you compare the two?

And if you were to discount this back.

So if we believe these numbers, if we believe the books, the book value of the shares is about 3.02 per share.

110 divided by 1.05 squared is equal to 99.77.

So it equals 104,76.

Choice number three, the 20 today, the 20 now, well that's just worth 20.

So the present value of 20 today, well that's just 20.

So that is the value in 2 years.