Present value and future value are important concepts in finance that help to evaluate the worth of money over time.
Present value (PV) is the current value of a future sum of money, discounted at a specific rate to reflect the time value of money. This means that the present value is the amount of money that would have to be invested today, at a specific interest rate, in order to equal a specified future sum of money. The formula for calculating present value is:
PV = FV / (1 + r)n
where PV is the present value, FV is the future value, r is the interest rate, and n is the number of periods.
Future value (FV) is the value of a sum of money at a specific time in the future, given a specified interest rate. This means that the future value is the amount of money that a current investment will be worth at a specific time in the future, assuming a specified interest rate. The formula for calculating future value is:
FV = PV x (1 + r)n
where FV is the future value, PV is the present value, r is the interest rate, and n is the number of periods.
In general, present value is used to evaluate the current value of future cash flows, while future value is used to evaluate the future value of current cash flows. These concepts are important in financial management and investment analysis, as they help project managers and investors to understand the time value of money and make informed decisions about investments and project financing.
COMPOUND INTEREST :
For deposit of Rs 1000 in bank at 10% per annum rate of interest, after one year this amount will grow to Rs 1100. If we do not withdraw interest amount after second year it become 1100+ 10X1100/100 = 1210 , after third year it will be 1331, after four year 1464 and so on.
Future value = present value x (1+r)n
where r = rate of interest and n= number of years
This formula can be employed for determining the present value of an amount receivable in the future
Present value = Future value / (1+r)n
Present value = Future value x Discount factor
Where
Discount factor = 1 / (1+r)n
Register & Download PDF for Educational Purposes Only
Project Planning and Management Study notes for M. plan Sem-II
project planning and management.pdf (Size: 1.29 MB / Downloads: 29)
Register as member and login to download attachment [pdf] by right-click the pdf link and Select “Save link as” use for Educational Purposes Only
FD Planning Community Forum Discussion
- What different types of Projects can be taken up for Urban Development?
- Project Appraisal of city level projects
- Demand Forecasting methods for Project
- Location analysis for a project
- Role and Responsibilities of Govt. Organizations in project management
- Principles of activity planning
- Defining Activities of activity planning
- Sequencing Activities of Activity planning
- Estimating Activity Resources of Activity planning
- Develop Schedule of Activity planning
Disclaimer
Information on this site is purely for education purpose. The materials used and displayed on the Sites, including text, photographs, graphics, illustrations and artwork, video, music and sound, and names, logos, IS Codes, are copyrighted items of respective owners. Front Desk is not responsible and liable for information shared above.