Assumptions and method
Payments must be equally spaced and paid at period end; annuities due differ.
Test a scenario
Use the result in a decision
Use consistent currency, timing and price assumptions.
Payments must be equally spaced and paid at period end; annuities due differ.
Set a baseline and change one assumption to compare outcomes.
A worked example
Follow the fixed teaching example
- Use five period-end payments and r = 0.06.
- Present value = 2,400 × (1 − 1.06⁻⁵) ÷ 0.06. The table below gives the rounded result.
These illustrative inputs describe a project scenario, not a published benchmark. All monetary inputs use the same currency and price basis.
- Payment per period
- 2400
- Rate per period (%)
- 6
- Whole periods
- 5
- Present value
- 10,109.6731
- Future value
- 13,529.0231
Interpret the output only within the assumptions above. Changing the inputs changes the result; it does not validate the inputs.
Source & credit
Standard financial mathematics; no single inventor is asserted.
OpenStax: Principles of Finance, capital budgeting
This is independently written code and explanation of the underlying method. The linked publication, its diagrams and its trademarks remain its owner’s material; no permission to reuse them is implied.