Discounting
Discounting is a technique used in economic evaluation that converts present and future costs and benefits into a common metric (i.e., present value) so that they can be added together. This is based on the principle that the same money today is not worth the same in one or more years. Discounting is applicable for any project or program that lasts more than one year.
The discounting formula to get to this present value in economic evaluations is:
Present Value = 1/(1+r)n
Where:
r = discount rate per period, usually a year
n = number of periods/years that will happen between the time the costs or benefits occur, and the period to which the values are discounted