424924.69 dollars are the present value. Here, r is 4%. So, PV = 100000/1.04 + 400000/1.045 = 96153.85 + 328770.84 = 424924.69$.
The present value of a sum of money or stream of cash flows that will occur in the future at a specific rate of return (PV). Future cash flows are discounted using the discount rate, and as the discount rate rises, so does the present value of those future cash flows.
The term "present value" refers to the value of a sum of money now, given its future value. The present value, for instance, is the value of $110 right now if you are promised it in a single year.
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