Try different values, periods and interest rate to see how
your loan or investment will perform (explanations below)
At 10% Interest money grows by 10% every year (as explained in Compound Interest):
Which is easier to calculate this way (same result):
Present Value (PV)
To see what money in the future is worth now, go backwards (dividing by 1.10 for 10% Interest):
Example: Sam promises you $500 next year, what is the Present Value?
So $500 next year is $500 ÷ 1.10 = $454.55 now (to nearest cent).
The Present Value is $454.55
See a detailed explanation at Present Value.
Net Present Value (NPV)
The Net Present Value is the total of all Present Values, including subtracting money that went out (the money you invested or spent):
- Add the Present Values you receive
- Subtract the Present Values you pay
Example: You invest $500 now, and get back $570 next year (interest Rate is 10%)
Money Out: $500 now
Money In: $570 next year
And the Net Amount is:
So, at 10% interest, that investment is worth $18.18
A Net Present Value (NPV) that is positive is good (and negative is bad).
Read more at Net Present Value