![]() ![]() N = The number of years from now when the payment is dueįor example, ABC International owes a supplier $10,000, to be paid in five years. P = The present value of the amount to be paid in the future The formula for calculating the present value of a future amount, using a simple interest rate, is as follows: The calculation shows which option has the higher present value, which drives the decision. The formula for the present value of a future amount is used to decide whether to make or receive a payment now or in the future. ![]()
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