Explore the applications of 'FV', one of the financial functions in Excel, often used to calculate the future value of an investment based on a constant interest rate. Learn how this function can be used with either periodic, constant payments, or a single lump sum payment.
Key Insights
- The 'FV' function in Excel is a financial tool that calculates the future value of an investment.
- This function takes into account a constant interest rate.
- The 'FV' function can be applied with either periodic, constant payments, or a single lump sum payment.
- Compounding periods are considered in the calculation, and in this case they are monthly, which is why the interest rate is divided by 12.
- The total number of payment periods is also factored into the function, and is calculated by dividing by the number of compounding periods per year.
- When inputs such as monthly payments are paid out, they are entered into the function as negative values.
Financial Modeling Essentials
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Three-Statement Model
Income statement, balance sheet, cash flow — linked.
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Forecasting Drivers
Revenue: price × quantity. Costs: % of revenue or per-unit.
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Sensitivity Analysis
Data tables for what-if on key inputs.
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Returns Analysis
IRR, NPV, payback — investment decision metrics.
FV, one of the financial functions, calculates the future value of an investment based on a constant interest rate. You can use FV with either periodic, constant payments, or a single lump sum payment.
As the compounding periods are monthly (=12), we divided the interest rate by 12. Also, for the total number of payment periods, we divided by compounding periods per year. As the monthly payments are paid out, they are entered into the function as negative values.
E78 = FV(F74/F76, F75*F76, -F73, -F72)
