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# Time Value of Money TutorialsTVM Calculations

## How to Calculate Future ValueTutorial 19

Calculating future value is one of the most frequently performed financial calculations.

wikinvest defines future value as "the amount that an investment made today will grow into at some point in the future." The Ultimate Financial Calculator is designed to calculate the FV under any scenario, for any cash flow.

While the classic FV example assumes a series of future deposits and answers the question "What will be the value of the accumulated deposits plus interest as of some future date?", for this example, we are going to turn things around. We will assume a starting value with periodic withdrawals so that we can answer the question "What will be the value after making "X" number of withdrawals for "Y" amount?". But if you follow along, you'll see just how easy it is to also answer the former question.

This example applies to our online Ultimate Financial Calculator. The C-Value! program for Windows works in a similar way and has a few more features including the ability to save your work.

All users should work through the first tutorial to understand basic concepts about the calculator.

To calculate the future value of a cash flow, follow these steps:

1. Set "Schedule Type" to "Savings"
• Or click the [Clear] button to clear any previous entries.
• The top two rows of the grid will not be empty
• Delete the 2nd row by selecting it and clicking on the [Delete] button
2. Set "Rounding" to "Open balance — no adjustment" by clicking on{Settings} {Rounding Options}
3. In the header section, make the following settings:
1. For "Calculate Method" select "Normal".
2. Set "Initial Compounding" to "Daily".
3. Enter 4.5 for the "Initial Interest Rate".
1. In row one of the cash flow input area, create a "Deposit" series
1. Set the "Date" to October 1, 2016
2. Set the "Amount" to 50,000.00 (this is the cash on hand)
3. Set the "# Periods" to 1
• Note: Since the number of periods is 1, you will not be able to set a frequency. If a frequency is set, it will be cleared when you leave the row
1. In row two, create a "Withdrawal" series
1. Set the "Date" to October 1, 2016
2. Set the "Amount" to 1,000.00
3. Set the "# Periods" to 48
4. Set the "Frequency" to "Monthly"
1. Create a 3rd series by clicking on row 3. Set the "Series" to "Withdrawal"
1. Set the "Date" to October 1
• We reset the date to the "End Date" because we want to know the future value of this cash flow immediately after the last withdrawal was made
2. Set the "Amount" to "Unknown"
1. Click the [Calculate] button
• The result is "\$7,225.50"
1. To see a detail cash flow schedule showing what the initial deposit earns in interest, click on the [Schedule] button.
• Notice that the withdrawals will total \$55,225.49
• And the initial deposit earned \$5,225.49 in interest even as it is being depleted due to the withdrawals.

Note: Anytime you want to know the future value, the last entry has to be "Unknown". You can create as many deposits and / or withdrawals as you need and their amount, interest rate and dates can vary, but to calculate the FV, set the last row to an unknown amount.