Present value in the context of "Net present value"

The marginal efficiency of capital (MEC) is that rate of discount which would equate the price of a fixed capital asset with its present discounted value of expected income.

The term “marginal efficiency of capital” was introduced by John Maynard Keynes in his General Theory, and defined as “the rate of discount which would make the present value of the series of annuities given by the returns expected from the capital asset during its life just equal its supply price”.

Future value is the value of a current sum of money or stream of cash flows at a specified date in the future, given an assumed rate of return or interest rate. It reflects the time value of money, which holds that a sum of money has different value at different points in time because it can earn a return if invested.

In finance and economics, future value is used to express how much a present present amount will grow when it earns simple interest or compound interest, and to compare different investment or borrowing options.

In investment, an annuity is a series of payments of the same kind made at equal time intervals, usually over a finite term. Annuities are commonly issued by life insurance companies, where an individual pays a lump sum or a series of premiums in return for regular income payments, often to provide retirement or survivor benefits.

Typical examples include regular deposits to a savings account, monthly home mortgage payments, monthly insurance premiums and pension payments. The value of an annuity is usually expressed as a present value or future value, calculated by discounting or accumulating the payments at a specified interest rate.