Discount factor calculation in Excel has become an indispensable tool for investors seeking to understand the present value of their future cash flows. This guide will explore the methodologies utilized to calculate discount factors within Microsoft Excel, providing practical knowledge and applicable steps.
A discount factor, expressed as a decimal, signifies the current worth of a future sum of money. Particularly crucial in capital budgeting, this factor enables investors to weigh the time value of money. The discount rate, a key historical development, reflects the required rate of return on the underlying investment.