An annuity due is a type of annuity where payments are made at the beginning of each period, as opposed to an ordinary annuity where payments are made at the end of each period.
A mathematical figure showing the present value of an income stream that generates one dollar of income each period for a specified number of periods.
An annuity in advance is a series of equal or nearly equal payments made at the beginning of each period. These payments can be for various financial obligations including rent, leases, or annuity payments.
Compound discount is the difference between the value of an amount in the future and its present discounted value. For example, if £100 in five years' time is worth £88 now, the compound discount will be £12.
Discounted Payback Method is a method of capital budgeting in which managers calculate the time required for the forecasted discounted cash inflows from an investment to equal the initial investment expenditure, considering the time value of money.
The discounted value is the present worth of a future sum of money or stream of cash flows, given a specific rate of discount. It plays a critical role in various financial assessments.
The future value is the value that a sum of money will have in the future when invested at compound interest. If the future value is *F*, and the present value is *P*, at an annual interest rate *r*, compounded annually for *n* years, the formula is *F = P*(1 + r)^n. This concept is crucial for understanding the growth of investments over time.
Future Worth, also known as the Future Value (FV), refers to the amount of money that an investment made today will grow to at a specific point in the future when interest is compounded over time.
A series of equal or nearly equal payments made at the end of each equally spaced period. An ordinary annuity is commonly used in financial products like mortgages, leases, bonds, and retirement accounts.
Today's value of a future payment or stream of payments, discounted at an appropriate compound interest or discount rate; also known as the time value of money.
Today's value of an amount to be received in the future, based on a compound interest rate. For example, at a 12% interest rate, the receipt of one dollar one year from now has a present value of $0.89286.
The present value (PV) of an annuity is the current value of a series of future payments, discounted at a specific interest rate over a specific number of periods. It is a fundamental concept in finance and accounting, allowing individuals and businesses to evaluate the worth of future payments in today's terms.
The present-value factor is an accounting term that represents the multiplier used to determine the present value of a series of future cash flows, considering a specific discount rate.
The Reversionary Factor is a mathematical factor that indicates the present worth of one dollar to be received in the future. It is equivalent to the Present Value of 1.
The Rule of 72 is an approximation used to determine the number of years required to double the principal at a fixed annual rate of compound interest. By dividing 72 by the annual interest rate, one can estimate the length of time it takes for the initial investment to grow twofold.
A method for valuing the entire equity in a company, based on the net present value of future cash flows. Developed by Alfred Rappaport in the 1980s, Shareholder Value Analysis (SVA) emphasizes the time value of money and focuses on future performance rather than past accounting records.
The time value of money (TVM) concept, key to discounted cash flow calculations, posits that cash received earlier is worth more than the same amount received later due to the potential earning capacity of money. Conversely, future payments are valued less than payments made in the present.
