Future Value of a Single Cash Flow- Cash Flow at one time only
The Future Value of a single cash flow (compounded annually) can be calculated with the help of following formula:
FV = PV(1 + i)^n
The term (1 + i)^n is the compound value factor (CVF) of a lump sum of Re 1, and it always has a value greater than 1,
Fn = P x CVFn,i
Future Value of Annuity- Stream of Equal Annual Cash Flows
(Stream of Equal Annual Cash Flows)
Annuity is a fixed payment or receipt each year for a specified number of years. If you make a payment of insurance premium over an agreed period, you have created an annuity.
FVAn = A [(1+r)^n -1/r]
FYAn- Accumulation at the end of years n
A-Amount deposited invested at the end of every year for n years
r-Rate of interest (expressed in decimal)
n-Time horizon
The term within brackets is the compound value factor for an annuity of Re 1, which we shall refer as CVFA.
Fn=A*CVFAn,i