1

Using these annual PVFs and an annual end-of-the-year positive net cash flow of $100,000, the PV of each of the cash flows over the three year period would be calculated as:

Thus, given an interest or discount rate of 10%, were one to consider $1,000 of savings in Year 10 as equivalent to $1,000 in the present, conclusions drawn from the analysis would be erroneous. Conversely, the FV of a present sum of money (PV) over n periods at an interest rate i per period would be calculated as:

Year

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