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Unformatted text preview: values found using the equation or
the table, although for the purposes of this text, these differences are
Spreadsheet Use The present value of the single future amount also can be calculated as shown on the following Excel spreadsheet. A Graphical View of Present Value
Remember that present value calculations assume that the future values are measured at the end of the given period. The relationships among the factors in a
present value calculation are illustrated in Figure 4.6. The figure clearly shows
that, everything else being equal, (1) the higher the discount rate, the lower the PART 2 Important Financial Concepts FIGURE 4.6 Present Value of One Dollar ($) 142 Present Value
Discount rates, time periods,
and present value of one
dollar 1.00 0% 0.75 0.50
5% 0.25 10%
0 2 4 6 8 10 12 14 16 18 20 22 24
Periods present value, and (2) the longer the period of time, the lower the present value.
Also note that given a discount rate of 0 percent, the present value always equals
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