Abstract:
The article examines the main milestones in the development of present value and discounted cash flow from the moment of their first appearance in 1202 in “Liber Abaci” by the Italian mathematician Leonardo Pisano and other books on financial mathematics of medieval Europe to the theoretical justification in the writings of economists at the turn of the XIX and XX centuries. It is shown that some theoretical developments and practical applications of the discounted indices, in one form or another, had been existed long before “The Theory of Interest” published in 1930 by the American economist Irving Fisher, recognized as the founder of the discounted cash flow method. The article describes the contribution to the development of present value made by three different directions: financial mathematics, engineering economics and political economy. Some historical examples of the application of present value and discounted cash flow method are given.
