-25000 3000 6000 6000 10000 8000 7000

0 1 2 3 4 5 6

Future Value of 1000 after 10 years at iterest rate of 10%

Present value 500000 for 10 years at 15% rate of interest

1 Single Cash Flow Calculation

2 Annunity Cash Flow 3 Perpetuaity

Ordinary Annuity Cash Flow at the end of time

Annuity Due Cash Flow at the start of the year

4 Mixed Cash Flow amounts could be different as well as time could d

 2019 10 11

total 10 11

average 2 2.2
 7 8 9 10 11 12 13 14 15 16

Future Value Compounding Compound rate

Present Vaule Discounting Discount Rate

Perpetuaity

Time Equal amount or cash flow equal

rt of the year

fferent as well as time could different

 FVn = PV ´ (1 + i)n Future Value of Single Cash Flow

FVn= Future Value of amount

Pv or Po= Present Value

1 Present vaule

I or r Rate of Interest / Compound Rate/ Opportunity cost

n or t time periods No of Years between present value and future value

PV $1
i n pv FV
A 0.12 2 1 1.2544
B 0.06 3 1 1.191016
C 0.09 2 1 1.1881
D 0.03 4 1 1.125509

PV $1
i n pv FV
A 0.05 20 200 530.6595
B 0.08 7 4500 7712.209
C 0.09 10 10000 23673.64
D 0.1 12 25000 78460.71
E 0.11 5 37000 62347.15
F 0.12 9 40000 110923.2

p3 Pv 100
Fv 200
i 0.12 0.06
n ?

FV = Pv x (1+i)^n
200 = 100 x (1.12)^n
200/100 = (1.12)^n
2= (1.12)^n
log 2 = nlog(1.12)
0.30102999566398 = n x 0.049218 0.025306
.30103/.049218 = n
6.1162553741997 = n 11.89566
lue of Single Cash Flow Methods of Calculation

1 Formula

2 Financial Table

3 Financial Calculator

4 Computer software
 Present Value of Single Cash Flow

P5-16 Investment Gain/Loss

A Fv n i PV Today
A 28500 3 0.11 20838.95 20000 838.9544
B 54000 9 0.11 21109.94 20000 1109.938
C 160000 20 0.11 19845.43 20000 -154.5749

P5-17 Investment
A Fv n i PV Today Gain/Loss % gain
A 30000 5 0.1 18627.64 18000 627.6397 3.486887
B 3000 20 0.1 445.9309 600 -154.0691
C 10000 10 0.1 3855.433 3500 355.4329 10.15523
D 15000 40 0.1 331.4239 1000 -668.5761

10000 14071
? 5928.996
5%
p 5-18 10000 ? 20000

0 1 2 3 4 5 6 7

Total of Future Value of 10000& ? After 7 year= 20000

Future of 10000 for 7 year 10000*(1+i)n 14071
Futuer Value of ? For 4 years 5928.996

Present Value of 5928.996 at the end of year 3

5928.996/(1.05)^4 4877.8
gle Cash Flow
 Future Value of Annuity

CF 300
n 10
i 8%
FV
(1+i)^n 2.158925
(1+i)^n -1 1.158925
(1+i)^n -1/0.8 14.48656
cf* (1+i)^n -1/0 4345.969

(1+i/m)^n*m 2.191123
(1+i/m)^n*m -1 1.191123
(1+i/m)^n*m -1 29.77808
cf* (1+i/m)^n* 4466.712

CASE Sum to be Acc n i CF

A 5000 3 0.12
B 100000 20 0.07
C 30000 8 0.1
D 15000 12 0.08

FVn= CF x (((1+i)^n)-1)/r)
A 5000 cf 3.3744
5000/3.3744 cf
1481.7449028 CF

fv 220000 fv 182546.1
N 42 N 42
I 0.08 I 0.08
CF 723.1 CF 600

i=9% i-10%
 ?????????????? 20000

???
0 20 50
31024 173875.9
PV=FV*(1+09)^20 188538
10798
FVA CF* (1+r)^n-1)/r
188538 CF* 57.275
3291.803

Option 1

Option 2 40000/.05 x 1- 1/((1.05)^25)

Benefit in option 2

Option 1

Option 2 40000/.07 x 1- 1/((1.07)^25)

Benefit in option 2

IRR= Lower Rate +( difference in rates x (63757/(63757+33857)

5 2 0.653154260659
1.306309
6.306309

FVn= Future Value of Annuity

CF= Cash Flow ( Amount of equal end of period payment/receipts)
r=i Rate of Interest
t=n Time of Annuity
Ord Annuity
Amount r t Future Value of Annuity Calculation
P5-19 Cases CF i n (1+i)^n (1+i)^n-1 (1+i)^n-1/i CF*((1+i)^n-1/i)
A 2500 0.08 10 2.158925 1.158925 14.486562466 36216.40616477
B 500 0.12 6 1.973823 0.973823 8.1151890432 4057.5945216
C 30000 0.2 5 2.48832 1.48832 7.4416 223248
D 11500 0.09 8 1.992563 0.992563 11.028473797 126827.4486604
E 6000 0.14 30 50.95016 49.95016 356.78684702 2140721.082142

Annuity C Ordinary Annuity D Due

n 10 n 10
cf 2500 cf 2200
1) i 0.1 i 0.1
2) i 0.2 i 0.2

Ord Annuity
Amount r t Future Value of Annuity Calculation
Cases CF i n (1+i)^n (1+i)^n-1 (1+i)^n-1/i CF*((1+i)^n-1/i)
10% C 2500 0.1 10 2.593742 1.593742 15.937424601 39843.5615025
D 2200 0.1 10 2.593742 1.593742 15.937424601 35062.3341222

20% C 2500 0.2 10 6.191736 5.191736 25.958682112 64896.70528

D 2200 0.2 10 6.191736 5.191736 25.958682112 57109.1006464

CF 300 1.08^10 -1 /.08

n 10 300 x 2.158925 -1 /.08
i 0.08 1.158925
300 x 14.48656
4345.969

150 x 1.04^20 -1 /.04

75 1.02^40 -1 /.02
7335.8073394
 500000

563757
63757

500000

466143
-33857

Annuity Due
(1+i)
(1+i)
1.08 39113.718658
1.12 4544.5058642
1.2 267897.6
1.09 138241.91904
1.14 2440422.0336
Annuity Due
(1+i)
(1+i)

1.1 38568.567534

1.1 62820.010711
 Present Value of Annuity

case PV I N CF 1/(1+I)n
A 12000 0.08 3 0.793832
B 60000 0.12 10
C 75000 0.1 30
D 4000 0.15 5

PV = CF/i x 1/(1+I)n
12000 = CF/.08 x 0.793832 0.206168
12000/.2061 = CF/.08
58204.9591 = CF/.08
15116.54*.08= CF
4656.39673

LOAN AMORTIZATION SCHEDULE

End of Loan Opening Payment Ending

Year Payment Balance Interest Principal Balance
1 2 3 4 5 6
3Xi 2-4 3-5
1 6460.97 15000 2100 4360.97 10639.03
2 6460.97 10639.03 1489.464 4971.5058 5667.524
3 6460.97 5667.5242 793.4534 5667.516612 0
19382.91 4382.918 14999.992412

LOAN AMORTIZATION SCHEDULE

End of Loan Opening Payment Ending

Year Payment Balance Interest Principal Balance
1 2 3 4 5 6
3Xi 2-4 3-5
1 4235.22 10000 1300 2935.22 7064.78
2 4235.22 7064.78 918.4214 3316.7986 3747.981
3 4235.22 3747.9814 487.2376 3747.982418 0
 12705.66 2705.659 10000.001018

P5-20 Amount r t Present Value of Ordinary Annuity

Cases CF i n Cf/i (1+i)^n 1/(1+i)^n
A 12000 0.07 3 171428.57143 1.225043 0.816298
B 55000 0.12 15 458333.33333 5.473566 0.182696
C 700 0.2 9 3500 5.15978 0.193807
D 140000 0.05 7 2800000 1.4071 0.710681
E 22500 0.1 5 225000 1.61051 0.620921

P5-20 Amount r t Present Value of Ordinary Annuity

Cases CF i n Cf/i (1+i)^n 1/(1+i)^n
A 2500 0.1 10 25000 2.593742 0.385543
B 2200 0.1 10 22000 2.593742 0.385543

D 2500 0.2 7 12500 3.583181 0.279082

E 2200 0.2 5 11000 2.48832 0.401878

31024.82
0 20 30
i=.09 i=11%
173875.85146932
CF 20000

a PVn= 20000/.11 x 1- 1/(1.11)^30

PVn= 181818.182 x 1- 0.043683
PVn= 181818.182 x 0.956317
PVn= 173875.851

b Pv= Fv/(1+i)^n
Pv= FV / (1.09)^20
Pv= 173875.851 / 5.604411
Pv= 31024.8229

c amount will decrease

0 3291.80778712999
0 20 30
i=.1 i=.1
 188538.3
CF 20000

a PVn= 20000/.10 x 1- 1/(1.10)^30

PVn= 200000 x 1- 0.057309
PVn= 200000 x 0.942691
PVn= 188538.289

d2 Fva= CF x (1+i)^n - 1/
188538.3 CF x 6.7275 - 1/
188538.3 5.7275 /
188538.3 = cf x 57.274999493
3291.808 = cf
i=.05
$
p25 Option 1 Receive today 500000

option 2 Receive 40000 each year for 25 Years

Rate of Interest = 0.05
PV of Annunity CF 40000 563757.8
i 0.05
n 25
571428.571 0.815751 0.1842491775
benefit in choosing annuity a@ 5 % interest rate 63757.78
Benefit in choosing signle cash flow today

Internal Rate of Return:IRR

Lower Rate + Difference in Rates x Positive NPV/(Sum of Positive+ Neg
IRR 5 + 7-5 x 63757.78/(63757.78+33856.67)
IRR 5 + 2 x 0.653159
IRR 5 + 1.306318
IRR 6.306318 0.06306318

634284.492 0.7832180863929 0.2167819136

496783.086

12000 = CF/.08 x 1- 1/(1.08)^3

12000 = CF/.08 x 1- 0.793832
12000 = CF/.08 x 0.206167759
58205.03 CF/.08
4656.402 cf
 End of Loan
Year Payment

1 4656.402
2 4656.402
3 4656.402
13969.21

9% 30 years
0 20 50
? 173875.85146932
20000

a Present Value of Annuity= ?

Cash Flow/Value of Annuity= 20000
n 30
i 0.11
181818.2 1- 1/((1.11)^30)
181818.2 1- 0.043683
0.9563171830813
Pv 173875.9

b FV 173875.851
n 20
i 9%
PV 31024.8229
10%
30 years
0 20 50
? 188538.28933977 0
20000

Present Value of Annuity= ?

Cash Flow/Value of Annuity= 20000
n 30
i 0.1
200000 1- 1/((1.10)^30)
200000 1- 0.057309
0.9426914466988
188538.3
FVA CF 1+i^n -1/i
188538.3 CF 57.274999493256
3291.808 CF

FV = PV (1+i)^n
15000 = 10200 x (1+i)^5
1.470588 = (1+i)^(5*1/5) x 1/5
1.080185 = 1+i
0.080185 i
8.018519

15000 = 7150 x (1+i)^5 15000

2.097902 (1+i)^5 1.840491
1.15973 1+i 1.129761
0.15973 i 0.129761
15.97304 12.97614

Cash Cash
Years Flows FV 12% Years Flows
0 0 30000 52870.25
1 30000 47205.5808 1 25000 39337.98
2 25000 35123.2 2 20000 28098.56
3 20000 25088 3 10000 12544
4 10000 11200 4 5000 5600
5 5000 5000 5
123616.7808 138450.8
1.12
138450.794496

Cash Cash
Years Flows PV 12% Years Flows
0 0 30000 30000
1 30000 26785.714285714 1 25000 22321.43
2 25000 19929.846938776 2 20000 15943.88
3 20000 14235.604956268 3 10000 7117.802
4 10000 6355.1807840483 4 5000 3177.59
5 5000 2837.134278593 5
70143.481243399 78560.7
1.12
78560.698992607
Case pv I m n i/m n*m FV
A 2500 0.06 2 5 0.03 10 3359.791
B 50000 0.12 6 3 0.02 18 71412.31
C 1000 0.05 1 10 0.05 10 1628.895
D 20000 0.16 4 6 0.04 24 51266.08

Effective Annual Rates 0.0609 6.09

0.126162419264 12.61
0.05
0.16985856 16.98
 (cf/i)*(1-1/(1+i)^Present Value of Annuity Due
1-(1/(1+i)^n)
0.1837021231 31491.792533 1.07 33696.22
0.8173037387 374597.546921 1.12 419549.3
0.8061933005 2821.67655186 1.2 3386.012
0.2893186699 810092.275636 1.05 850596.9
0.3790786769 85292.7023117 1.1 93821.97

(cf/i)*(1-1/(1+i)^Present Value of Annuity Due

1-(1/(1+i)^n)
0.6144567106 15361.4177643
0.6144567106 13518.0476326 1.11 15005.03

0.7209183528 9011.47940958
0.598122428 6579.34670782 1.2 7895.216
 0.1
0.1
0.1

i=.07

500000

466143.32713

33856.67287

Positive NPV/(Sum of Positive+ Negative NPV)

63757.78/(63757.78+33856.67)

1/(1.08)^3
 Endof
Beging of Year
Year
Principal
Payment Principal
2 3=2*.08 4=1-3 5=2-4
Interest Principal
12000 960 3696.402 8303.598
8303.5978314 664.287826516 3992.114 4311.483
4311.4834894 344.918679152 4311.483 0
1969.20650567 12000
= 8150 x (1+i)^5
(1+i)^5
1+i
i
3359.7909484
 PV = CF ÷ r
Present Value of Perpetuity

Years CF FV Years CF FV
0 0 900 1264.435
1 900 1128.96 1 1000 1254.4
2 1000 1120 2 1200 1344
3 1200 1200 3
3448.96 x(1.12) 3862.835
3862.835

Years CF FV Years CF FV
0 0 30000 52870.25
1 30000 47205.58 1 25000 39337.98
2 25000 35123.2 2 20000 28098.56
3 20000 25088 3 10000 12544
4 10000 11200 4 5000 5600
5 5000 5000 5
123616.8 138450.8 138450.8

Years CF FV Years CF FV
0 0 -2000 -2000
1 -2000 -1785.714 1 3000 2678.571
2 3000 2391.582 2 4000 3188.776
3 4000 2847.121 3 6000 4270.681
4 6000 3813.108 4 8000 5084.145
5 8000 4539.415 5
11805.51 -1.12 13222.17 13222.17

P-26 Perpetuity CF R/I pv

A 20000 0.08 250000
B 100000 0.1 1000000
C 3000 0.06 50000
D 60000 0.05 1200000
 Future Values
p28 Years CF FV12% Years CF FV12%
0 0 900 1264.435
1 900 1128.96 1 1000 1254.4
2 1000 1120 2 1200 1344
3 1200 1200 3
3448.96 3862.835
1.12
3862.835

Years CF FV12% Years CF FV12%

0 0
1 30000 47205.58 1 1200 1685.914
2 25000 35123.2 2 1200 1505.28
3 20000 25088 3 1000 1120
4 10000 11200 4 1900 1900
5 5000 5000
123616.8 1.12 138450.8 6211.194

Years CF PV 12% Years CF FV12%

0 0 900 900
1 900 803.5714 1 1000 892.8571
2 1000 797.1939 2 1200 956.6327
3 1200 854.1363 3
2454.902 2749.49
1.12
2749.49

Years CF PV 12% Years CF PV 12%

0 0
1 30000 26785.71 1 1200 1071.429
2 25000 19929.85 2 1200 956.6327
3 20000 14235.6 3 1000 711.7802
4 10000 6355.181 4 1900 1207.484
5 5000 2837.134
70143.48 1.12 78560.7 3947.326

p27 Option 1
pv 24000
i 0.07
n 5
 FV 33661.24
Option2
Years CF FV
0 2000 2805.103
1 4000 5243.184 1596.504
2 6000 7350.258
3 8000 9159.2
4 10000 10700
5 35257.75 35257.75

Years CF PV .12 Years CF PV .12 Years

0 0 0
1 -2000 -1666.667 1 10000 8928.571 1
2 3000 2391.582 2 5000 3985.969 2
3 4000 2847.121 3 5000 3558.901 3
4 6000 3813.108 4 5000 3177.59 4
5 8000 4539.415 5 5000 2837.134 5
11924.56 6 7000 3546.418 6
26034.58 7
8
9
10

Years CF PV .15 Years CF PV .15

0 0
1 50000 43478.26 1 10000 8695.652
2 40000 30245.75 2 20000 15122.87
3 30000 19725.49 3 30000 19725.49
4 20000 11435.06 4 40000 22870.13
5 10000 4971.767 5 50000 24858.84

109856.3 91272.98

Years CF PV .12
0
1 30000 26785.71
2 25000 19929.85
3 15000 10676.7
4 15000 9532.771
 5 15000 8511.403
6 15000 7599.467
7 15000 6785.238
8 15000 6058.248
9 15000 5409.15
10 10000 3219.732
Opt 1 104508.3
Opt2 100000

Years CF PV .08
0
1 5000 4629.63
2 4000 3429.355
3 6000 4762.993
4 10000 7350.299
5 3000 2041.75
22214.03

Years CF PV .05 PV .07

0
1 800 761.9048 747.6636
2 900 816.3265 786.0949
3 1000 863.8376 816.2979
4 1500 1234.054 1144.343
5 2000 1567.052 1425.972
6200 5243.175 4920.371

Years CF 0.04
0
1 10000 9615.385
2 5000 4622.781
? 3 1000 863.8376
4 20000 17096.08
5 3000 2465.781
39000 34663.87
Present Value of total Stream 32911.03
Present Value of 4 figure 34663.87
Present Value of mission figure 1752.838
Value of missing figure 1971.705
 I=12%
Future Value
1 If deposit are at the end of the year
2 if deposit are at the beginning of the year

1.12 6956.537

1.12 4421.005
 i=.12

CF PV .12

10000 8928.571
10000 7971.939
10000 7117.802
10000 6355.181
10000 5674.269
8000 4053.049
8000 3618.794
8000 3231.066
8000 2884.88
8000 2575.786
52411.34
 m Multiple Compounding

PV 5000
a i 0.12
n 5
Future Value Using FV= PV*(1+i)n
1 Annual Compounding PV*(1+i/1)^n*1 5000*(1+0.12/2)^5*1 6691.128
2 Semiannual Compounding PV*(1+i/2)^5*2 8954.238
3 Quarterly Compounidng PV*(1+i/4)^5*4 9030.556

PV 5000
b i 0.16
n 6
Future Value Using Effective Annual Rate
1 Annual Compounding 12181.98 16%
2 Semiannual Compounding 12590.85 16.60%
3 Quarterly Compounidng 12816.52 17%

PV 5000
c i 0.2
n 10
Future Value Using
1 Annual Compounding 30958.68 20%
2 Semiannual Compounding 33637.5 21%
3 Quarterly Compounidng 35199.94 21.60%

Cases Future Value effective Annual Rate

A 3359.79 0.061%
B 71412.31 12.600%
C 1628.89 5.000%
D 51226.08 17.000%
Effective Annual Rate
1 ((1+.12/1)^1*1) -1 1.12 - 1 0.12 12%
2 ((1+.12/2)^1*2)-1 1.1236 - 1 0.1236 12.36%
3 ((1+.12/4)^1*4)-1 1.125509 - 1 0.125509 12.55%

Effective Annual Rate

Effective Annual Rate

Effective Annual Rate
 Continous Compounding
e= 2.71828182845904

Cases PV e i n e^(1*n) FV
A 1000 2.718282 0.09 2 1.197217 1197.217
B 600 2.718282 0.1 10 2.718282 1630.969
c 4000 2.718282 0.08 7 1.750673 7002.69
D 2500 2.718282 0.12 4 1.616074 4040.186

effective annual rate

Annual 4317 8%
Semi 4382 8.20%
daily 4450.69 8.33%
cont 4451.08 134.08 8.33
Calcuation of Cash Flow
 Growth Rate

Years CF g
1 500
2 560 1
3 640 2
4 720 3
5 800 4

r 800/500 1.6 1.124683 0.124683 12.46%

b r 2280/1500 1.52 1.047623 0.047623 4.76

1.16 1.025045 0.025045 2.50%

Year
0 1500
1 1
2 2
3 2000 3

1.333333 1.100642 0.100642 10.06%

Years A
0
1 500
2 560 1
3 640 2
4 720 3
5 800 4
6
7
8
9
10
g (800/500)^(1/4) -1
1.124683 -1 0.1246 12.46%

0 1500
1 1
2 2
3 2000 3
july 220635
august 220635
september 220635
october 220635
november 220635
december 220635
january 241824
february 241824
march 241824
april 241824
may 241824
june 241824
2,774,754.00