Show the present value of a single flow, Financial Management

Q. Show the Present Value of a Single Flow ?

Discounting or else Present Value of a Single Flow (Lump Sum):- We are able to determine the PV of a future cash flow using the formula:

PV = FV (1+i) n

Where FV = Future value of the preliminary flow in n years

PV= Present Value

i= Annual rate of interest

n = No. of years

Example: - Mr. X anticipate to have an amount of Rs. 1000 subsequent to one year what should be the amount he has to invest today if the bank if offering 10% interest rate?

PV = 1000 (1+.10) 1

PV = Rs. 909.09

Posted Date: 8/3/2013 3:47:11 AM | Location : United States

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