framtíðarvirði

Framtíðarvirði refers to the projected value of an asset or investment at a specific point in the future. This concept is crucial in finance, economics, and accounting for making informed decisions about investments, loans, and financial planning. It takes into account the initial value, expected growth rate, and the time period over which that growth is anticipated.

The calculation of future value (FV) typically involves compounding, where earnings from an investment are reinvested to generate further earnings. The basic formula for future value is FV = PV * (1 + r)^n, where PV is the present value, r is the interest rate or rate of return per period, and n is the number of periods. Variations of this formula exist to account for different compounding frequencies, such as monthly or quarterly.

Understanding future value helps individuals and businesses estimate how much their savings or investments will be worth over time. This is essential for retirement planning, assessing the feasibility of long-term projects, and determining the true cost of borrowing money. Conversely, the concept of present value (PV) is the inverse, calculating the current worth of a future sum of money, discounted back at a specific rate of return. Both future and present value are fundamental tools in financial analysis and valuation.