Present value

What a future amount is worth today, once discounted at a rate that reflects the wait and the risk.

Say you're owed ₹5,00,000 in three years. Discounted at 12%, it's worth ₹3,55,890 today.

Now try a different rate, because this is the part worth feeling for yourself. At 10% the same ₹5,00,000 is worth ₹3,75,657. At 14% it's ₹3,37,486. Four points of assumption, in a rate nobody can pin down, move the answer by 10.2%. Even a two-point move, from 12% to 14%, shifts it 5.2%.

And that's only three years out. Stretch the horizon to fifteen and the same four points move the answer by 41%, because the rate compounds against you for five times as long. So an intrinsic valuation is defensible only when you present it as a range. Anyone quoting a target price to the rupee is describing their spreadsheet more than the company.

Discounting is a way of being careful about uncertainty. It won't make the answer precise.

Wait longer or risk more, and it's worth less.