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The financial concept
known as the time value of money determines the purchase price of your asset.
This financial model states that a dollar is worth more now than a dollar in the future, even after making adjustments for inflation due to the fact today’s dollar can earn interest until the time a like dollar is received in the future.
For example, if you have an asset that will give you $1,000 in three years and you sell that asset for $900 today rather than waiting three years to get it. Won’t you rather have the $900 now to invest, start a business, or payoff old bills that may be at a high interest rate? With the $900 in your pocket now, you could earn much more than the $100 cost for waiting for the full $1,000 three years hence.
The difference from the
$1,000 and the $900 is called the discount, which in this instance would be
$100. All cash flow assets
are purchased with a discount. That
is how funding sources, such as Capital Funding of America, derive what the
return is on the money that would be paid to you for your cash flow
asset. The discount rate will
affect what you are paid due to many variables.
Some of these include how far in the future your payments are
scheduled, the risk due to the creditworthiness of the person making the
payments to you, and the current market value of the cash flow asset
instrument, just to name a few.
Please contact us for more information at 1-800-322-5985 to see how we can help, or use this link to our CONTACT US page.
