Definition of Present Value

It almost goes without saying, but bears repeating, that it is better to have money in hand, than it is to have a right to receive the same amount of money at some future date.  Even if you could eliminate entirely the risk that you might not receive the money, the person who has money right now can invest the money and earn more.  The person who has a right to money, but not possession of it, does not have the ability to invest the money from the current date, to the date of future receipt.   The loss of potential future value, as a result of not having possession now, is an important function, and goes by the name "opportunity cost".  

As a result of this opportunity cost, money in hand is considered to have greater value than the same amount of money to be recieved in the future.  It is possibly to calculate the current value of a certain amount of money which has already been received (and therefore presumably invested for return), or will be received.  Economist call the outcome of this calculation the "Present Value" of the money.