Future ValueNet Present ValueWhat is Future Value Future Value is the final value of a Dollar available todaywhen invested for a specified period of time and earnedcompound interest during the period invested In case of common stock, Future Value is the price atwhich the companys common stock will be trading atafter a specified period of time which may be less than ormore than or equal to one year from todayFactors used in Future Value Formulaof lump sum Investment Future Value formulaPV * (1 + i) n Where, PV = Present value of a Dollar or the beginning amount or theamount of money which is invested today i = interest rate the bank or company pays on the amountinvested with it per year. Such interest rate can be simple interestrate or the compound rate of interest where compounding can bedaily, weekly, monthly, quarterly, semi-annually or annually n = Time period of investmentExample of Future Value Formula oflump sum Investment PV = Amount invested today is $10,000 i = 10% per annum compounded annually n = 5 yearsFuture value of this investment at end of year 1, 2, 3, 4 and 5Year12345$10,000 * (1 + 0.10) ^ 1$10,000 * (1 + 0.10) ^ 2$10,000 * (1 + 0.10) ^ 3$10,000 * (1 + 0.10) ^ 4$10,000 * (1 + 0.10) ^ 5Future Value11,000.0012,100.0013,310.0014,641.0016,105.10Factors used in Future Value Formulaof Annuity Future Value formula of an annuityA * [(1 + i) n 1] / i Where, A = ...
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