Interest Formulas
Future value of single cash flow.
Single Cash Accumulation  Future Value
The accumulated value of a present sum invested at a given interest rate after some time can be expressed as
F = P (1 + i)^{n} (1)
where
F = accumulated value in the future Future Value
P = principal or present sum invested
i = interest rate per period
n = number of interest periods
The factor "(1 + i)^{n}" is known as the "single payment compound amount factor".
Example  Accumulated amount
An amount of 1000 is invested at interest rate 10% (0.1) per year for 10 years. The accumulated amount can be calculated like
F = 1000 (1 + 0.1)^{10}
= 2594
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Discounting Process  Present Value
The Present Value  or Present Worth  of a future cash flow can be calculated with the discounting process and is expressed like
P = F / (1 + i)^{n } (2)
where
P = present value
F = future cash flow
i = discount rate or discounting factor
n = numbers of periods
The factor "1 / (1 + i)^{n}" is known as the "single payment present worth factor".
Example  The present value of a future sum
A sum of 1000 is paid after 10 years. The discount rate is 10% (0.1) per year. The present value of the future payment can be calculated like
P = 1000 / (1 + 0.1)^{10}
= 386
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Related Topics

Economics
Engineering economics  cash flow diagrams, present value, discount rates, internal rates of return  IRR, income taxes, inflation.
Related Documents

Cash Flow Diagrams
The future value of money. 
Discrete Compounding Cash Flow Formulas
Discrete payments compounding equations and online calculators . 
Interest Rate
Interest rate is the cost of money. 
Internal Rate of Return  IRR
Internal Rate of Return (IRR)  the breakeven interest rate. 
Net Present Worth (NPW) of a Cash Stream
The value of a stream of payments is called the Net Present Worth (NPW). 
Present Value
The value of money in the future is the Present Value.