Assumptions and method
Use matching periods and a rate appropriate to the cash flow; this is not a rate recommendation.
Test a scenario
Use the result in a decision
Use consistent currency, timing and price assumptions.
Use matching periods and a rate appropriate to the cash flow; this is not a rate recommendation.
Set a baseline and change one assumption to compare outcomes.
A worked example
Follow the fixed teaching example
- Convert 6% to 0.06.
- Future value = 12,000 × 1.06⁴ = 15,149.72352.
These illustrative inputs describe a project scenario, not a published benchmark. All monetary inputs use the same currency and price basis.
- Amount
- 12000
- Rate per period (%)
- 6
- Periods
- 4
- Future value
- 15,149.7235
- Present value
- 9,505.124
- Discount factor
- 0.7921
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.