Discounting Future Benefits

Discounting future benefits means adjusting their value to reflect that receiving benefits now is often more valuable than receiving the same benefits later. This is because of factors like inflation, the potential to earn interest elsewhere, and personal preferences for immediate gains. For example, $100 today is generally worth more than $100 a year from now. By applying a discount rate, we calculate what future benefits are worth in today's terms, helping make informed decisions about investments, projects, or policies that involve benefits occurring over time.