I NTRODUCTI ON TO FI NANCE

FORMULAE FORMULAE
Some I mpor t ant For mul ae Some I mpor t ant For mul ae
1) Fut ure Value of a Single Cash Flow I nvest ed for n Periods
FV= P* FF(r,n) FV Fact or, FF(r,n)= (1 + r)
n
2) Present Value of a Single Cash Flow Received n Periods from Now 2) Present Value of a Single Cash Flow Received n Periods from Now
PV= F* PF(r,n) PV Fact or,
( )
n
r 1
1
n) PF(r,
+
=
3) Fut ure Value of a St ream of Cash Flows as of n Periods from Now
( ) ( ) ( )
n 1 n
2 n
2
1 n
1
C r 1 * C ... r 1 * C r 1 * C FV + + + + + + + =
÷
÷ ÷
4) Present Value of a St ream of Cash Flows
( ) ( )
PV
C
1 r
C
1 r
...
C
1 r
1 2
2
n
n
=
+
+
+
+ +
+
2
Some I mpor t ant For mul ae Some I mpor t ant For mul ae
5) Fut ure Value of an Annuit y Paying $C at t he End of Each of n Periods
FV = C* FAF(r,n) FV Annuit y Fact or,
( ) | | 1
n
r 1 *
1
n) FAF(r ÷ + =
6) Present Value of an Annuit y
( ) | | 1 r 1
r
n) FAF(r, +
(
(

1 1
PV = C* PAF(r,n) PV Annuit y Fact or,
7) Present Value of an Annuit y growing at rat e g:
( )
(
¸
(

¸

+
÷ =
n
r 1
1
1 *
r
1
n) PAF(r,
) y g g g
PV= C* PAF(r,n,g)
( )
( )
(
(
¸
(

¸

+
+
÷
÷
=
n
n
r 1
1
1 *
r
1
) n, PAF(r,
g
g
g
3
( )
(
¸

¸
Some I mpor t ant For mul ae Some I mpor t ant For mul ae
8) Present Value of a Perpet uit y
r
C
PV =
9) Present Value of a Const ant Growt h Perpet uit y
PV
C
1
=
r g ÷
4

FF(r.n) FV Factor.n)=(1 + r)n 2) Present Value of a Single Cash Flow Received n Periods from Now PV=F*PF(r. n)  1 1  r n 3) Future Value of a Stream of Cash Flows as of n Periods from Now FV  C1* 1  r n1  C2 * 1  r n 2  ..n) PV Factor..  Cn 1* 1  r   Cn 4) Present Value of a Stream of Cash Flows PV  C1 C2 Cn  2 .Some Important Formulae 1) Future Value of a Single Cash Flow Invested for n Periods FV=P*FF(r.. n 1  r 1  r  1  r 2 .. PF(r.

n)  r * 1  n  1  r   ) yg g g 7) Present Value of an Annuity growing at rate g: PV=C*PAF(r. n. FAF(r n)  * 1  r n 1 r   6) Present Value of an Annuity  1  1 PV = C*PAF(r.g)  1  g n  1 * 1  PAF(r.Some Important Formulae 5) Future Value of an Annuity Paying $C at the End of Each of n Periods FV = C*FAF(r.n) PV Annuity Factor. PAF(r.n.n) FV Annuity Factor. g )   r g  1  r n    3 . 1 FAF(r.

Some Important Formulae 8) Present Value of a Perpetuity C PV  r 9) Present Value of a Constant Growth Perpetuity PV  C1 r g 4 .

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