This is a cash inflow from the decision-makers point of view so present value is positive in the case of borrowing when you make a loan payment to lender or repay the loans principal this is a cash outflow from the-decision-makers point of view so future. value is negative in the case of borrowing so always consider the inflows and outflows of cash from the decision-makers.

Point of view now let’s go to the spreadsheet suppose you invest seven thousand dollars in five years CD earning six percent per year how much we have in five years our rate is input either as decimal or as a percentage let’s input it as a percentage cheap residential property analyst Adelaide number of periods there are five compounding periods five years are present value is negative seven thousand it’s negative because they’re purchasing a CD and that’s a cash outflow from the decision-makers point of view and want to solve for the future value.

At the end of five years we go to formulas financial formulas and scroll down find future value FM in the dialog box we put in our six percent rate number of periods five periods are present value negative seven thousand and we got our solution seven dollars and change let’s move on the present value the firm’s investment and financing decisions require valuing real assets and financial assets discounted cash flow valuation calculates the value of an asset as a present value of its future cash flow stream discounting is the opposite of compounding discounting moves the future value back in time to determine its present value it determines how much one dollar tomorrow is worth today it answers.