🎯 Goal: See why a future dong is worth less than today's, the basis of valuation.
A dong next year is worth less than a dong today because: it could earn returns, inflation erodes it, and there's risk you may not receive it. So we discount future cash to the present — the intuition of DCF (Discounted Cash Flow): a business's value ≈ the sum of future cash flows brought back to today.
Let’s explore
⏳
1M received in a year < 1M today: if you had it today, you could already invest it to grow.
📉
Discounting: divide future cash by (1+r) each year. Higher r (more risk) means smaller present value.
🧮
DCF: value ≈ sum of future cash flows after discounting. Cash that comes sooner and surer is worth more.
Practice activity
🧮 Receive 110M in 1 year, discount rate 10%. Value today?
Worked example: Present value = 110 ÷ (1 + 0.10) = 100M. So 110M next year is "worth" exactly 100M today if money can earn 10%/yr.
Quick quiz
1. Why is a future dong < a present dong?
→ Returns, inflation, risk
2. To "discount" cash flow means?
→ Bring future value to the present
3. Receive 121M in 2 years, discount 10%/yr. Value today?
→ 100M
4. A higher discount rate makes present value?
→ Smaller
5. DCF values a business based on?
→ Future cash flows brought to today
🎯 Real-life mission
Ask an adult: "Would you take 1,000,000đ today OR 1,100,000đ in a year — which, and why?". Note their answer and connect it to interest, inflation or risk.