Browse Accounting Lessons Here Accounting Terms & Definitions Accounting for Merchandising Activities Debits and Credits (Double Entry Accounting) Business Valuation Formulas Time Value of Money & Present/Future Values Complex Debt & Equity Instruments Common Stock & Shareholder's Equity Accounting & Finance Ratios Valuing Common Stock Corporate Income Taxes Lower of Cost or Market (LCM) & Inventory Valuation Chart of Accounts & Bookkeeping Bonds Payable & Long Term Liabilities Capital Assets GAAP, Accrual & Cash Accounting, Information Commodity, Internal Controls & Materiality What category of browser are you on this website? Accounting student (homework help) Finance professor (university research) Accounting manager (at work) Other Explore Careers in Accounting and Finance Visit our section on Careers in Accounting & Finance to explore vast opportunities in this industry.

Chapter 4.10® - Summary of Time Value Formulas & Calculations

Important Symbols

PV = Present Value, what expected future cash flows are worth today.

FVt = Future value, what today’s cash flows are worth in the future.

r = Interest rate or rate of return or discount rate per period – Usually is compounded annually or once a year.

t = Number of periods, usually 1 year or several years.

C = Cash amount today

ii) Future value of C invested at r percent for t periods

FVt = C x (1 + r)t

This is also known as the future value factor.

iii) Present value of C to be received in t periods at r percent per period

PV = C / (1 + r)t

The equation 1 / (1 + r)t is also known as the present value factor.

iv) Basic Present value equation describing the relationship between present & future value

PV = FVt / (1 + r)t