Future value of single or multiple cash flows
To determine the future value of cash flows, we must apply the compounding technique. Compounding may be yearly/annually, half-yearly, quarterly, monthly etc.
Future Value of Single Cash Flow
Future value can be calculated by the following formula:
FVn = PV (1 + r)n
Where
FV= Future value
PV= Present value
r = Rate of Interest
n = Number of periods
Example: FV of single cash flow compounded annually
Let us compute the future value of an investment of $ 2,000 compounded annually/yearly at the rate of 12%, after 4 years period.
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FV
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=
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$ 2,000 x (1 + 0.12) 4
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=
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$ 3,147.04
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