Present Value/ Future Value
Present value is where the value on a set date of a future payment is discounted to reflect the time value of money and other factors. This can also apply to a series of future payments. Present value calculations are commonly utilized in business and economics to provide a way to compare cash flows at different times. Present value can be described as the current worth of a future sum of money or stream of cash flows given a specified rate of return. (http://www.getobjects.com) Future cash flows are discounted at the discount rate. The higher the discounted rate, the lower the present value of the future cash flows. Determining what the appropriate discount rate is, is important to correctly place value future cash flows. The Present Value of an Ordinary Annuity is the value of a stream of promised or expected future payments that have been discounted to a single equivalent value today. It is extremely useful for comparing two separate cash flows that differ in some way.
Present Value of an Ordinary Annuity can also be looked at as the amount you have to invest today at a specific interest rate so that when you withdraw an equal amount each period, the original principal and all accumulated interest will be completely used at the end of the annuity.
Present Value of an Ordinary Annuity= Payment [(1 - (1 / (1 + Discount Rate per period)number of periods)) / Discount Rate Per Period] Future value measures the nominal future sum of money that a given sum of money is "worth" at a specified time in the future assuming a certain interest rate, or more generally, rate of return; it is the present value multiplied by the accumulation function. The value does not include corrections for inflation or other things that affect the real value of money in the future. It can also be described as the value of an asset or cash at a specified date in the future that is equivalent in value to a specified sum today. (http://www.investopedia.com/terms/f/futurevalue.asp) There
Present Value of an Ordinary Annuity can also be looked at as the amount you have to invest today at a specific interest rate so that when you withdraw an equal amount each period, the original principal and all accumulated interest will be completely used at the end of the annuity.
Present Value of an Ordinary Annuity= Payment [(1 - (1 / (1 + Discount Rate per period)number of periods)) / Discount Rate Per Period] Future value measures the nominal future sum of money that a given sum of money is "worth" at a specified time in the future assuming a certain interest rate, or more generally, rate of return; it is the present value multiplied by the accumulation function. The value does not include corrections for inflation or other things that affect the real value of money in the future. It can also be described as the value of an asset or cash at a specified date in the future that is equivalent in value to a specified sum today. (http://www.investopedia.com/terms/f/futurevalue.asp) There