It is Money Value concept....

According to it present Rs. 1 is valued more than Rs. 1 received in future....

We can invest present Rs. 1 and can get returns. (so if we get that Rs. 1 now we can invest and make returns on it).....but when Rs. 1 is received later, we will miss the return which would have got if the  Rupee had received now.....

So when Rs. 1 is received in future, it have less value than Rs. 1

so we use Discounting factors to get Present Value of future inflow

Hope  you understood the concept.........

Oh thanks.. Really explained it well .. Thank you :)

good explanation by dev