Financial Management: Core Concepts, Third Edition

Chapter 4 The Time Value of Money (Part 2)

AT a Glance

1. LO1 Compute the future value of multiple cash flows. To obtain the future value of multiple payment streams, bring all the cash flows to the same point in time and add them together with their accumulated interest.

2. LO2 Determine the future value of an annuity. An annuity is a series of equal cash payments at regular intervals across time. The future value of an annuity can be determined by multiplying the payment or deposit by the factor $$[{(1+r)}^n-1]/r$$, where r is the interest rate and n is the number of payments. This factor is known as the future value interest factor of an annuity ...