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VALUATION OF FUTURE CASH FLOWS FUTURE VALUE WHAT WILL $$ GROW TO?? PRESENT VALUE WHAT ARE FUTURE $$ WORTH TODAY?? WOULD YOU RATHER HAVE $10,000 TODAY OR $100,000 IN 20 YEARS???
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Calculating Future and Present Values of Cash Flows Formulas Tables Financial Calculators Microsoft Excel
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FUTURE VALUE FUTURE VALUE OF $1 FV = PV(1 + I) T FV OF $1 table
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What Table Do I Use? FV of $1 How much will $1 grow to in the future? How much will I have in 30 years if I invest $1,000 now at 6% ? How much will something cost in the future? How much will a double cheeseburger in 40 years if the $1.00 cost increases by four percent per year?
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What Table Do I Use? FV of Annuity How much will $1 every year grow to in the future? How much will I have in 30 years if I invest $2,000 every year at 9% ?
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What Table Do I Use? PV of $1 What is $1 in the future worth today? How much is $1,000 received in 30 years worth today? Must be less than $1,000 !!!
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PRESENT VALUE HOW MUCH IS $100,000 RECEIVED IN 20 YEARS WORTH TODAY IF YOU CAN INVEST AT 12% INTEREST COMPOUNDED ANNUALLY?? PV = $100,000 / (1.12) 20 = $10,567
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PRESENT VALUE PRESENT VALUE OF $1 PV = FV / (1 + I) T PV OF $1 table
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What Table Do I Use? PV of Annuity How much will $1 received every year in the future worth today? How much is it worth today to receive $80 per year for 30 years if I want a 9% rate of return?
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