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    Present Value and Future Value of Annuities

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    How would a manager calculate present value and future value for single amounts, annuities, and uneven streams of cash flow.

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    1. The present value for a single amount:
    The present Value for a single amount is an amount today that is equivalent to a future payment, or series of payments, that has been discounted by an appropriate interest rate and is calculated as:

    PV = FV
    (1 + i)^n


    PV = Present Value
    FV = Future Value
    i = Interest Rate Per Period
    n = Number of Compounding Periods

    2. The present value for an annuity:
    Annuities are defined as being a stream of equal cash flows into the future at evenly spaced intervals. The Present Value of an Annuity (PVoa) is the value of a stream of expected or promised future payments that have been discounted to a single equivalent value today. The Present Value ...

    Solution Summary

    The solution determines the present value and future value of annuities.