A dollar later is not a dollar now
Money available today can be invested and is generally less uncertain than a risky payment years away. Present value discounts future cash using a rate appropriate to timing and risk. For a single end-of-period cash flow, PV = future cash / (1 + rate)^periods. Keep rates and periods consistent.
Compare timing
At a 10% annual discount rate, $121 received in two years has a present value of 121 / 1.1² = $100. Receiving $121 today is more valuable under these assumptions. The discount rate is not simply an arbitrary penalty; it reflects the required return for the relevant risk and funding perspective.
Net present value (NPV) is the present value of project cash inflows minus the present value of outflows. A project costing $100 now and returning $121 in two years has zero NPV at 10% in this simple example. Higher returns or a lower appropriate required rate would change the result.
An internal rate of return (IRR) is a discount rate that sets NPV to zero. Nonconventional cash-flow patterns can have multiple or no useful IRRs; different project scale and timing can also make IRR rankings misleading. NPV at an appropriate hurdle directly measures modeled value added.
Use nominal cash flows with nominal rates and real cash flows with real rates. Do not discount annual cash flows at a monthly rate without conversion. Time, currency and risk must match before the mathematics can answer the intended question.