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$2.$ Time Value of Money: Lump Sums

payments are known as lump sums. We can solve for the future value or the present value of a lump sum as we discuss below.

Finding the future value $($FV$),$ or $-$Se $,,$ is the process of going from today's values to future amounts. The FV equation is:

$F{V}_N=PV(1+I{)}^N$

shows how any sum grows over time at various interest rates. The greater the interest rate, the the growth rate.

Finding the present value $($PV$)$ is called discounting, and it is simply the reverse of $[$ In general, the present value of a cash flow due $N$ years in the future is the amou which, if it were on hand today, would grow to equal the given future amount. The PV equation is:

Present value $=PV=\frac{F{V}_N}{(1+I{)}^N}$

A graph of the discounting process shows how the present value of any sum to be received in the future decreases and approaches as the years to receipt increases, and th present value declines faster at interest rates. The fundamental goal of financial management is to maximize the firm's value, and the value of any asset is the $-$ Select$-v$ va of its expected future cash flows. spreadsheet. How much will you be able to withdraw at the end of $5$ years? Do not round intermediate calculations. Round your answer to the nearest cent.

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