What is future value?
Future value (FV) is the projected amount that a present sum will grow to at a future date, given a specified rate of return and compounding frequency. FV is the inverse of present value — both are foundational time-value-of-money concepts used in every valuation, investment-return calculation and financial-planning exercise.
Formula
For a single present amount compounded over n periods at rate r:
FV = PV × (1 + r)^n
Example: $10,000 invested today at 7% annual compound return for 10 years grows to $10,000 × (1.07)^10 = $19,672.
Compounding frequency matters
- Annual compounding at 8%: FV = PV × 1.08^n
- Quarterly compounding at 8%: FV = PV × (1 + 0.08/4)^(4n) — slightly higher
- Monthly compounding at 8%: FV = PV × (1 + 0.08/12)^(12n)
- Continuous compounding at 8%: FV = PV × e^(0.08 × n) — the theoretical upper bound
Future value vs. related concepts
- FV vs. PV: PV discounts the future to today; FV compounds today to the future.
- FV vs. nominal growth: nominal FV is in current dollars; real FV adjusts for inflation by deflating with an inflation index.
- FV vs. accumulated return: FV captures both principal and accumulated return; “accumulated return” usually means FV − PV.
Where founders meet FV
- Option-pool refresh planning: what the option pool will be worth at a target valuation.
- SAFE-cap modelling: what cap converts to at the priced round.
- Retirement and personal planning: what current savings grow to at target retirement age.
- Investment evaluation: what a series of investments compound to under different return assumptions.
Do: always specify the discount/return rate, compounding frequency, and currency assumption when quoting an FV; check whether you mean nominal or real.
Don’t: use nominal FV in long-horizon scenarios without thinking through inflation — at 4% inflation, a 30-year nominal FV overstates real purchasing power by ~3.2x.