what is future value

Future value is the value of an asset at a specific date in the future, assuming a certain interest rate or rate of return. It measures the nominal future sum of money that a given sum of money is "worth" at a specified time in the future. Future value is used for planning purposes to see what an investment, cash flow, or expense may be in the future. It is a key concept in finance that draws from the time value of money, which means that a dollar today is worth relatively more than a dollar in the future. The operation of evaluating a present value into the future value is called capitalization. The reverse operation, which consists of evaluating the present value of a future amount of money, is called discounting. Future value calculations are important for investors and corporations to estimate the value of an investment on a later date to guide decision-making.