Future Value of a Lump Sum Formula

Formula

FV = PV x (1 + i)n
Variables used in the formula
PV = Present Value
FV = Future Value
i = Discount rate
n = Number of periods

Use

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).

Excel Function

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.

Future Value of a Lump Sum Formula November 6th, 2016Team

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