In this model, the dollar you capture 14 years from now is woth .95^14 dollars. For simplicity let's assume your stock is going to creat 1$ 1 year from now. How much is that worth today?
Well if you sold a bond today for 95cents with the agreement to give a dollar in 1 year then next years dollar is worth 95 cents. Well what if you sold 2 bonds this year and one next year, you effectivly move up the future cash flow for the next two years at a discount that keeps getting larger the further back in time you pull the money.
Well if you sold a bond today for 95cents with the agreement to give a dollar in 1 year then next years dollar is worth 95 cents. Well what if you sold 2 bonds this year and one next year, you effectivly move up the future cash flow for the next two years at a discount that keeps getting larger the further back in time you pull the money.