Summary of Time Value Calculations

I. Symbols:

PV = Present value, what future cash flows are worth today FVt = Future value, what cash flows are worth in the future r = Interest rate, rate of return, or discount rate per period—typically, but not always, one year t = Number of periods—typically, but not always, the number of years C = Cash amount

II. Future value of C invested at r percent for t periods:

The term (1 + r)' is called the future value factor.

III. Present value of C to be received in t periods at r percent per period:

The term 1/(1 + r)' is called the present value factor.

IV. The basic present value equation giving the relationship between present and future value is:

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