Net Present Value
Weighted Average Cost of Capital
DCF Key Questions
Combine Action Plans
Compounding and discounting
"Compound interest - it is the greatest mathematical
discovery of all time"
You put money in an account today (its present value - PV)
for a promised rate of return (interest - INT) for a number of periods
(NPER - usually months or
The interest received in reinvested at the end of each period - it compounds.
The future value (FV) is the value of the investment compounded at the
end of a given number of periods. We know the value of our initial investment
interest rate, and can
the FV at the end of any
It is the reverse of compounding. We know the how much we need on a
specific date in the future (FV) and calculate how much
we need to invest today, PV,
at an interest rate. Work from the future back to the present.
You can find Excel functions to make these calculations by searching
Excel's Help File for FV (compounding) or PV (discounting).
The boss thinks about
Discounted cash flow and net present value