I NTRODUCTI ON TO FI NANCE

FORMULAE FORMULAE
Some I mpor t ant For mul ae Some I mpor t ant For mul ae
1) Future Value of a Single Cash Flow Invested for n Periods
FV=P*FF(r,n) FV Factor, FF(r,n)=(1 + r)
n
2) Present Value of a Single Cash FlowReceived n Periods fromNow 2) Present Value of a Single Cash Flow Received n Periods from Now
PV=F*PF(r,n) PV Factor,
( )
n
r 1
1
n) PF(r,
+
=
3) Future Value of a Stream of Cash Flows as of n Periods from Now
( ) ( ) ( )
n 1 n
2 n
2
1 n
1
C r 1 * C ... r 1 * C r 1 * C FV + + + + + + + =


4) Present Value of a Stream of Cash Flows
( ) ( )
PV
C
1 r
C
1 r
...
C
1 r
1 2
2
n
n
=
+
+
+
+ +
+
2
Some I mpor t ant For mul ae Some I mpor t ant For mul ae
5) Future Value of an Annuity Paying $C at the End of Each of n Periods
FV = C*FAF(r,n) FV Annuity Factor,
( ) | | 1
n
r 1 *
1
n) FAF(r + =
6) Present Value of an Annuity
( ) | | 1 r 1
r
n) FAF(r, +
(
(

1 1
PV = C*PAF(r,n) PV Annuity Factor,
7) Present Value of an Annuity growing at rate g:
( )
(

+
=
n
r 1
1
1 *
r
1
n) PAF(r,
) y g g g
PV=C*PAF(r,n,g)
( )
( )
(
(

+
+

=
n
n
r 1
1
1 *
r
1
) n, PAF(r,
g
g
g
3
( )
(

Some I mpor t ant For mul ae Some I mpor t ant For mul ae
8) Present Value of a Perpetuity
r
C
PV =
9) Present Value of a Constant Growth Perpetuity
PV
C
1
=
r g
4