Accounting › Section X · Capital budgeting decisions › Topic X.3
Present and future value of lump sums and annuities
A dollar today is worth more than a dollar next year, because today's dollar can be invested. Four formulas move single amounts and streams of equal payments forward and backward in time, and they are the engine of bond pricing and of every discounted capital budgeting method.
In this topic
- Why money has time value
- Future value of a lump sum
- Worked example: compounding a deposit
- Present value of a lump sum
- Worked example: saving for a replacement
- Annuities and their future value
- Worked example: a regular savings plan
- Present value of an annuity
- Worked example: pay now or pay over time
- Tables, spreadsheets and bonds
- Common mistakes to avoid
- Key takeaways
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