Other Applets
Stocks Valuation
Bonds Valuation
Mortgage
Present Value
Present Value (Uneven CFs)
Future Value
Future Value (Uneven CFs)
Internal Rate of Return
Modified IRR
Net Present Value
Yield to Maturity
PVIF
PVIFA
FVIF
FVIFA
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Usually an annuity includes series of constant payments over a period of time. Although a large number of financial decisions involve constant payment yet other important decisions involve non constant or uneven cash flows. The manner in which Future Value of uneven cash flows in derived is elaborated in the following paragraphs. The Future value FV of an uneven cash flow stream ( sometimes called the terminal value ) is found by compounding each payment to the end of the stream and then summing the future values.
EXAMPLE 1 For example, suppose we need to find the PV of the following cash flow stream, discounted at 6% SOLUTION The future value of the series of annual payments can be found by using the formula mentioned above,
Using MS Excel to compute Future Value of Annuities FV(rate,nper,pmt,pv,type) Returns the future value of an investment based on periodic, constant payments and a constant interest rate. Rate is the interest rate per period. Nper is the total number of payment periods in an annuity. Pmt is the payment made each period; it cannot change over the life of the annuity. Typically, pmt contains principal and interest but no other fees or taxes. If pmt is omitted, you must include the pv argument. Pv is the present value, or the lump-sum amount that a series of future payments is worth right now. If pv is omitted, it is assumed to be 0 (zero), and you must include the pmt argument. Type is the number 0 or 1 and indicates when payments are due. If type is omitted, it is assumed to be 0. |
