The following practical question how much much i invest today that have some specified some at a future date in the previous lecture reconsider the present value of future value over a single . now we want to consider the more general case the present value of future value over multiple periods we begin with the standard future value equation which will now call the time value of money equation and will solve for present value by dividing both sides by plus R raise the teeth power and we get the standard.

Equation for present value the present value is equal to the future value in your tea raise the teeth power where disinterest rate per period when moving a future value back in time it’s also called the discount rate and discounted cash flow valuation the appropriate discount rate is the opportunity cost of capital plus R is raised the teeth power Ortiz a total number of periods of which cash flow is discounted we can rearrange the equation to get another version of the standard equation for present.

value the present value is equal to the future value in your tee times the present value factor periods now let’s look at an example how much must invest today at nine percent to have $, five years from the day in your five we have a future value of ten thousand dollars and when it discount that back five years to determine its present value first calculate the present value using the standard present value equation the present value is equal to a future value a present value factor Adelaide Property Valuers at total periods we have a future value of present value factor at nine percent for five periods doing the math we have a present value factor.