FV = PV x (1 + i)n
PV = Present Value
FV = Future Value
i = Discount rate
n = Number of periods
The future value of a lump sum formula shows what a cash lump sum received today will be worth in the future.
The formula compounds the value of a lump sum at the start of period 1 (present value), forward to its value at the end of period n (future value).
The Excel FV function can be used instead of the future value of a lump sum formula, and has the syntax shown below.
FV(i, n, pmt, PV, type)
*The pmt and type arguments are not used when calculating the future value of a lump sum.
Future Value of a Lump Sum Formula Example
If a lump sum of 15,000 is received at the start of period 1, and the discount rate is 5%, then the value of the lump sum at the end of period 10 is given by the future value of a lump sum formula as follows:
FV = FV x (1 + i)n FV = 15,000 x (1 + 5%)10 FV = 24,433.42
The same answer can be obtained using the future value formula in Excel as follows:
FV = -FV(i,n,,PV) FV = -FV(5%,10,,15000) FV = 24,433.42
The future value of a lump sum formula is one of many used in time value of money calculations, discover another at the link below.