Net Future Value (NFV) is the value in the future of a series of financial streams.
At its core, it combines a number of different future value calculations added together.
Each year is a separate future value calculation that are added together.
The future value formula is:
Future Value = Present Value x (1 + Rate of Return)Number of Periods
- “Present Value” is a sum of money in the present.
- “Rate of return” is a decimal value rate of return per period (the calculator above uses a percentage). A return of “2.2%” per year would be calculated as “0.022.”
- “Number of Periods” are the number of compounding periods. In the case of Net Future Value, it is the number of years until the future value year.
Assuming a 2.2% rate of return, what is the net future value of $1,000 1 year before the date, $2,000 2 years before the date, and $5,000 3 years before the date?
- FV of $1,000 over 1 year = $1,022.00
- FV of $2,000 over 2 years = $2,088.97
- FV of $5,000 over 3 years = $5,337.31
Total of all FV sums = $8448.28
What is the difference between future value and net future value?
Net future value is the sum of multiple future value calculations.
What is the difference between net future value and net present value?
Net present value (NPV) calculates the value of a sum of money in today’s dollars.
Net future value (NFV) calculates the value of a sum of money at some point in the future.