Present value

Present value (valeur actuelle) is the current worth of a future sum of money or stream of cash flows, discounted at an appropriate rate to reflect the time value of money and risk. It is the fundamental concept underlying all DCF valuation, net present value (NPV) analysis, earn-out pricing and pension liability measurement. The present value formula: PV = FV / (1+r)^n, where FV is the future value, r the discount rate and n the number of periods. The higher the discount rate or the longer the time horizon, the lower the present value — making discount rate selection the most sensitive assumption in any financial model.

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Example: CHF 5.0 million receivable in 5 years under an earn-out arrangement. Discounted at 8.0% (reflecting earn-out achievement risk), present value = CHF 5.0 / (1.08)^5 = CHF 3.40 million. This PV is recognised in the IFRS 3 PPA as the contingent consideration. A 2% change in the discount rate changes the PV by approximately CHF 250,000 — illustrating the sensitivity of contingent payment valuation to rate assumptions.

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At Hectelion, present value calculations are applied rigorously across DCF models, earn-out pricing and contingent liability assessments.