A discount rate formula is a mathematical equation used to determine the present value of a future sum of money. For instance, if you invest $100 today at a 5% annual discount rate, it will be worth $95.24 in one year.
Discount rates are essential for evaluating investment opportunities and making sound financial decisions. Understanding the formula and its applications can provide significant benefits, including the ability to compare different investment options, optimize cash flow, and plan for future expenses.