Also note that given a discount rate of 0 percent the

Info iconThis preview shows page 1. Sign up to view the full content.

View Full Document Right Arrow Icon
This is the end of the preview. Sign up to access the rest of the document.

Unformatted text preview: e future value ($1.00). But for any discount rate greater than zero, the present value is less than the future value of $1.00. Comparing Present Value and Future Value We will close this section with some important observations about present values. One is that the expression for the present value interest factor for i percent and n periods, 1/(1 i)n, is the inverse of the future value interest factor for i percent and n periods, (1 i)n. You can confirm this very simply: Divide a present value interest factor for i percent and n periods, PVIFi,n, given in Table A–2, into 1.0, and compare the resulting value to the future value interest factor given in Table A–1 for i percent and n periods, FVIFi,n,. The two values should be equivalent. Second, because of the relationship between present value interest factors and future value interest factors, we can find the present value interest factors given a table of future value interest factors, and vice versa. For example, the future value interest factor (from Table A–1) for 10 percent...
View Full Document

{[ snackBarMessage ]}

Ask a homework question - tutors are online