An investigation into the effect of ‘standard of living’ on the household sector of the Australian economy

When making informed judgements about the worth of an investment project spanning a number of years, the time value of money is an essential ingredient. Discounted present value is a measure of equivalence for time-phased costs and benefits derived from consideration or the theoretical investment return, preferably after tax. As it takes explicit account of the cost of finance, whether it be interest lost or interest payable, discounting can be described as leading to the determination of comparative value using an investment-based or opportunity approach.