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Present Value vs Future Value

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Financial
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Differences
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Present value is that amount without which we cannot obtain the
Time Value of
future value. The future value, on the other hand, is that amount
Money
which an individual will get after a certain time period from the
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In this article, we look at the differences between Present Value vs

Financial
Future Value.
Functions in

Excel

(https://www. What is Present Value?

wallstreetmoj
 Present value is a basic concept
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(https://www.wallstreetmojo.com/present-value-factor-pv/) in the
l-functions-in-
world of nance. Present value is the value which is today’s value.
excel/)
Suppose you invest today Rs 100 at 10% interest for 1 year then
Sensitivity after one year, the amount becomes Rs110. This Rs 100 which you
Analysis in
are investing today is called present value of Rs 110. Future value
Excel
is that value which will be the value in the future. So here Rs 110 is
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the future value of Rs 100 at 10%. Present value helps in taking
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decisions on investment which is based on the current value. So
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present value is the current value of the cash ows which will
ty-analysis-in-
happen in future and these cash ows happen at a discounted rate.
excel/)

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Excel What is Future Value?
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Future value, on the other hand, can be de ned as the worth of
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that asset or the cash but at a particular date in the future and that

ty-analysis-in- amount will be equal in terms of value to a particular sum in the

excel/) present. Future value calculations

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Time Value of
very important role in the world of nance. It is the basis of most
Money
important valuation techniques to value a company.
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 wallstreetmoj (https://www.wallstreetmojo.com/valuation-methods/) With the

o com/time- help of discounting a cash ow that is projected to be generated at
Financial Modeling
a future period the discounted cash ow technique
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 Tutorials
(https://www.wallstreetmojo.com/dcf-discounted-cash- ow/) is

used in order to value a company or any order asset class that

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o.com/) generates a certain amount of cash and is expected to continue

 wallstreetmoj generating cash for a particular future period.

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templates/)
Present Value vs Future Value –
Infographics
Excel Modeling
Here we provide you with the top 7 difference between Present

Financial
Value vs Future Value
Functions in

Excel

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Time Value of
Money

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Financial Modeling
Tutorials
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Excel Modeling

Financial
Functions in

Excel

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Analysis in
Excel

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Time Value of
Money

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Financial Modeling
Tutorials
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Excel Modeling

Financial
Functions in

Excel

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Time Value of
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Excel Modeling

Present Value vs Future Value – Key
Financial
Functions in
Differences
Excel The key differences between Present Value vs Future Value are as
(https://www. follows –

 wallstreetmoj

o.com/ nancia Present value is crucial because it is more reliable value and

l-functions-in- an analyst can be almost certain about that value, on the

excel/) other hand since the future value is a projected gure no one

can fully rely on that gure as in the future something can

Sensitivity
happen which can affect the projections.
Analysis in
Present value is de ned as the current worth of the future
Excel

(https://www. cash ow whereas Future value is the value of the future cash

wallstreetmoj ow after a certain time period in the future.


o.com/sensitivi While calculating present value in ation is taken into account

ty-analysis-in- but while calculating future value in ation is not considered.

excel/) While calculating present value discount rate and interest

both are considered but while calculating future value only

Time Value of
Money interest is considered.

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 wallstreetmoj Present value helps the investors in understanding and

o com/time- deciding whether an investment should be made or rejected.
Financial Modeling
Since future value tells about the future gains from an
Tutorials
 Tutorials
investment it does not have a signi cant role in decision

(https://www.wallstreetmoj making regarding an investment.

o.com/) Present value technique uses discounting to nd out the

 wallstreetmoj investment’s value on today’s date. Future value technique

o.com/ nancia uses compounding to nd out the investment’s future value.
l-modeling-
templates/)
Head to Head Difference
Excel Modeling Between Present Value vs Future
Financial

Value
Functions in
Let’s now look at the head to head difference between Present
Excel
Value vs Future Value
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o.com/ nancia

l-functions-in-
excel/)

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Analysis in
Excel

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ty-analysis-in-

excel/)

Time Value of
Money

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Basis – Present Value
o com/time- Present  Value Fu
Financial Modeling vs Future Value
Tutorials It is de ned a
 Tutorials  It is de ned a
Present value is de ned as the
cash ow afte
(https://www.wallstreetmoj current value of the cash ow in
Meaning period. This is
o.com/) future. It is basically the amount
which will be
 wallstreetmoj of cash in hand on today’s date.
o.com/ nancia future date.

l-modeling-
 It is the current value of an asset It is that value
templates/)
Time Frame or investment at the starting of a investment at

particular time period. time period.

Excel Modeling

Financial
 For the present value, in ation is For future valu
In ation Effect
Functions in considered. considered.

Excel
While calculating present value
(https://www.
both the discount rate and
 wallstreetmoj
interest rate are taken into  While calcula
o.com/ nancia Rates Applicable
account. interest rate is
l-functions-in-
(https://www.wallstreetmojo.com/
excel/)
discount-rate-vs-interest-rate/)
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Analysis in  Present value is very much  Since this re

Excel important for the investors as it from an invest

Decision Making
(https://www. helps to decide whether to invest importance in

 wallstreetmoj or not. regarding inve

o.com/sensitivi
ty-analysis-in-

excel/)

Time Value of
Money

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 wallstreetmoj
While calculating present value Future value c
o com/time-
discounting is applied to nd out compounding
Financial Modeling
the present value of every cash the future valu
Tutorials Calc lation Method
 Tutorials Calculation Method
ow and then all these values are after a certain

(https://www.wallstreetmoj added up to nd the investment’s all these value

o.com/) value on today’s date. the investmen
 wallstreetmoj

o.com/ nancia Present value is that amount

 Future value i
l-modeling- Nature which is required to obtain the
individual will
templates/) future value.

Excel Modeling

Conclusion

Financial
Functions in
Both present values vs future value are very much important to the
Excel
investors for taking crucial decisions regarding investment
(https://www.
wallstreetmoj decisions. While present value decides the current value of the

o.com/ nancia future cash ows future value decides the gains on the future

l-functions-in- investments after a certain time period. Present value is crucial

excel/) because it is a more reliable value and an analyst can be almost

certain about that value, that’s why it is easier to take a decision

Sensitivity
based on the present.
Analysis in
Excel
On the other hand, future value is important as without making
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projections for the future values it is very dif cult to make any
 wallstreetmoj
estimation whether its budget projections or any asset valuations.
o.com/sensitivi
But since the future value is a projected gure no one can fully rely
ty-analysis-in-

excel/) on that gure as in the future something can happen which can

affect the projections. present value and future value are connected
Time Value of
to each other and have signi cant importance in the eld of
Money
nance.
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o com/time- Recommended Articles
Financial Modeling
This has a been a guide to Present Value vs Future Value. Here we
Tutorials
 Tutorials
discuss the top 7 difference between Present Value and Future

Value along with infographics and comparison table. You may also
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