The process used by Terry is known as Discounting.
What is Discounting?
- A value obtained in the future is converted to an equivalent value received right away through the process of discounting.
- Discounting takes into account the relative value of a dollar received now against one received in 50 years, for instance.
- By converting future dollars into current dollars, the discounting process allows for the conversion of units of value over a range of time periods.
- Decision-makers utilize discounting to fully comprehend the costs and benefits of policies that have long-term effects.
Discounting is a method for calculating the gap between current and future values.
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