function calculateFutureValue() {
// Retrieve inputs exactly by ID
var pvInput = document.getElementById('fv_present_value').value;
var rateInput = document.getElementById('fv_discount_rate').value;
var yearsInput = document.getElementById('fv_years').value;
var compInput = document.getElementById('fv_compounding').value;
// Elements for display
var errorDiv = document.getElementById('fv_error');
var resultDiv = document.getElementById('fv_result');
var displayTotal = document.getElementById('res_fv_total');
var displayPrincipal = document.getElementById('res_fv_principal');
var displayGrowth = document.getElementById('res_fv_growth');
var displayEffective = document.getElementById('res_fv_effective_rate');
var displayPeriods = document.getElementById('res_fv_periods');
// Reset display
errorDiv.style.display = 'none';
resultDiv.style.display = 'none';
// Validation
if (pvInput === "" || rateInput === "" || yearsInput === "") {
errorDiv.innerText = "Please fill in all fields.";
errorDiv.style.display = 'block';
return;
}
var pv = parseFloat(pvInput);
var r = parseFloat(rateInput);
var t = parseFloat(yearsInput);
var n = parseInt(compInput);
if (isNaN(pv) || isNaN(r) || isNaN(t)) {
errorDiv.innerText = "Please enter valid numeric values.";
errorDiv.style.display = 'block';
return;
}
if (t < 0 || pv < 0) {
errorDiv.innerText = "Values cannot be negative.";
errorDiv.style.display = 'block';
return;
}
// Calculation Logic
// Formula: FV = PV * (1 + r/n)^(n*t)
// r must be converted from percentage to decimal
var rateDecimal = r / 100;
var periodsTotal = n * t;
var ratePerPeriod = rateDecimal / n;
var fv = pv * Math.pow((1 + ratePerPeriod), periodsTotal);
var growth = fv – pv;
// Effective Annual Rate (EAR) Calculation: (1 + r/n)^n – 1
var ear = Math.pow((1 + ratePerPeriod), n) – 1;
// Formatting
var formatter = new Intl.NumberFormat('en-US', {
style: 'currency',
currency: 'USD',
minimumFractionDigits: 2
});
// Update DOM
displayTotal.innerText = formatter.format(fv);
displayPrincipal.innerText = formatter.format(pv);
displayGrowth.innerText = formatter.format(growth);
displayEffective.innerText = (ear * 100).toFixed(4) + "%";
displayPeriods.innerText = periodsTotal.toFixed(1);
resultDiv.style.display = 'block';
}
Understanding the Future Value Discount Rate Calculator
The Future Value Discount Rate Calculator is a specialized financial tool designed to determine the future worth of a present sum of money (Present Value) assuming a specific rate of return, commonly referred to as the discount rate in valuation contexts. While often associated with discounting future cash flows back to the present, the mathematical relationship works both ways. By applying a discount rate forward, investors can estimate capital appreciation over time.
What is the Discount Rate?
In finance, the term "discount rate" can refer to the interest rate used in discounted cash flow (DCF) analysis to determine the present value of future cash flows. However, when calculating Future Value, this rate acts as the compounding growth rate or the required rate of return. It represents the opportunity cost of capital—essentially what you could earn elsewhere with similar risk.
The Calculation Formula
The calculator uses the standard Time Value of Money (TVM) formula adapted for compounding frequency. The logic is as follows:
FV = PV × (1 + r/n)(n × t)
Where:
FV: Future Value (the final amount).
PV: Present Value (the starting principal).
r: Annual Discount Rate (in decimal form).
n: Number of compounding periods per year.
t: Time period in years.
Why Compounding Frequency Matters
The frequency at which the discount rate is applied (compounded) significantly affects the Future Value. A rate that compounds monthly will yield a higher future value than the same rate compounded annually.
Annual Compounding: Interest is added once a year.
Monthly Compounding: Interest is added 12 times a year, allowing the interest to earn its own interest faster.
Our calculator provides the Effective Annual Rate (EAR) in the results, which shows the true annual return when compounding is taken into account.
Practical Applications
This tool is essential for:
Corporate Finance: Estimating the future value of capital reserves held at the corporate hurdle rate.
Investment Planning: projecting the growth of a lump sum investment at a target yield.
Inflation Adjusting: Calculating the nominal amount of money needed in the future to equal current purchasing power, using inflation as the discount rate.
Example Calculation
If you have a Present Value (PV) of $10,000 and you apply a Discount Rate of 5% compounded annually for 10 years: