Financial Modeling Tutorials
 Financial Modeling Basics
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 Time Value of Money
 Future Value Formula
 Present Value Factor
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 Present Value vs Future Value
 Annuity vs Pension
 Present Value of an Annuity
 Doubling Time Formula
 Annuity Formula
 Annuity vs Perpetuity
 Annuity vs Lump Sum
 Internal Rate of Return (IRR)
 NPV vs XNPV
 NPV vs IRR
 NPV Formula
 PV vs NPV
 IRR vs ROI
 Break Even Point
 Payback Period & Discounted Payback Period
 Payback period Formula
 Discounted Payback Period Formula
 Profitability Index
 Cash Burn Rate
 Simple Interest
 Simple Interest vs Compound Interest
 Simple Interest Formula
 CAGR Formula (Compounded Annual Growth Rate)
 Effective Interest Rate
 Loan Amortization Schedule
 Mortgage Formula
 Loan Principal Amount
 Interest Rate Formula
 Rate of Return Formula
 Effective Annual Rate
 Effective Annual Rate Formula (EAR)
 Daily Compound Interest
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 Discount Rate vs Interest Rate
 Rule of 72
 Geometric Mean Return
 Real Rate of Return Formula
 Continuous compounding Formula
 Weighted average Formula
 Average Formula
 Average Rate of Return Formula
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 Weighted Mean Formula
 Harmonic Mean Formula
 Median Formula in Statistics
 Range Formula
 Expected Value Formula
 Exponential Growth Formula
 Margin of Error Formula
 Decrease Percentage Formula
 Percent Error Formula
 Holding Period Return Formula
 Cost Benefit Analysis
 Cost Volume Profit Analysis
 Opportunity Cost Formula
 Mortgage APR vs Interest Rate
 Regression Formula
 Correlation Coefficient Formula
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 Coefficient of Variation Formula
 Sample Standard Deviation Formula
 Relative Standard Deviation Formula
 Volatility Formula
 Binomial Distribution Formula
 Quartile Formula
 P Value Formula
 Skewness Formula
 Regression vs ANOVA
Future Value Formula (Table of Contents)
Future Value Formula
Future Value Formula is a financial terminology used to compute the value of cash flow at a futuristic date as compared to original receipt. The objective is to understand the future value of a prospective investment and whether the returns yield sufficient returns to factor in the time value of money.
The formula for Future Value (FV) is:
Whereby,
 C_{0 = }Cash flow at initial point (Present value)
 r = Rate of return
 n = number of periods
Example of Future Value Formula
Let us analyze some examples:
If Mrs. Smith has $9,000 in her bank account and she earns an annual interest of 4.5%. With the help of the future formula, her account after 15 years will be:
 FV = 9,000 * (1 + 0.045) ^ 15
 FV = 9,000 * (1.045) ^ 15
 FV = 9,000 * 1.935
 FV = $17,417.54
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We can consider another example for better understanding:
Mrs. Smith has another account which has $20,000 paying an annual rate of 11% compounded on a quarterly basis. Since January 1, 2017, the terms of the agreement have been renewed and the compounded interest is attributed twice a month. Mrs. Smith wants to compute the total value of the account on December 31, 2017?
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We firstly need to arrive at the opening balance as on January 1, 2017:
 PV (Jan’16 – Dec’16) = $20,000
 Compounding period (n) = 4
 Annual interest rate (r) = 11% which converts to quarterly interest of 2.75 % [11% / 4]
 FV = 20,000 * (1 + 0.0275) ^ 4
 FV = 20,000 * (1.0275) ^ 4
 FV = $22,292.43 (This is the opening balance as of January 1, 2017)
Thus, now for calculating Future value as of 31^{st} December, 2017, the Present value if $22,292.43.
Compounding period (n) now is 2*12 = 24 since the compound interest is now twice a month.
Annual interest (r) = 11% which converts monthly interest rate = 11%/12 = 0.0092 [this will further be split twice a month thus, 0.92/2 = 0.0046%]
 Thus, FV = PV (1 + r) ^ n
 FV = 22,292.43 * (1 + 0.0046) ^ 24
 FV = 22,292.43 * (1.00046) ^ 24
 FV = 22,292.43 * 1.116
 FV = $24,888 [Value of the account as on December 31, 2017]
Use of Future Value Formula
 The primary benefit of FV is to determine whether an investment opportunity will garner sufficient yield in the future.
 The concept is applicable to Personal and Corporate decisions.
 The objective is to have an understanding of how economic factors can have an impact on the earnings such as Inflation, Standard of living, operating expenses/recurring expenses (separate analysis is required to be done).
 It shows the stream of payments which are expected to receive over a period of time e.g. a 10year investment can show how much returns can be earned every year.
 In certain circumstances, the formula is also used as an input to other formulas. For e.g., annuity in the form of recurring deposits in an interest account will be the FV of every deposit.
Future Value Calculator
You can use the following Future Value Calculator
C_{0}  
r  
n  
Future Value Formula =  
Future Value Formula = 
 

Future Value Formula in Excel (with excel template)
Let us now do the same example above in Excel. This is very simple. You need to provide the two inputs of Present value, Rate of return and Number of periods. You can easily calculate Future Value in the template provided.
Example – 1
Example – 2
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This has been a guide to Future Value Formula, practical examples, and FV calculator along with excel templates. You may also have a look at these articles below to learn more about Corporate Finance
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