Future Values

[Guest]

Why do you have to put a negative value for amount of payment and present
value?

LaVerna

 

[Peo Sjoblom]

Because it is money you have paid or will be paying.
So if you have a checking account and you invest 500 dollars every month,
that money would be a debit every month (the money will be subtracted from
your account, it is money you pay out)


Regards,

Peo Sjoblom

 

[Guest]

In accounting terms, debits are negative values. Payments are considered
debits; therefore they are entered as negative numbers.

Dave

 

[joeu2004]

Why do you have to put a negative value for amount of payment and present
value?

Well, you don't. But you do need to use __opposite_signs__ for the
directions of cash flows. You can choose to use positive numbers for
"inflows" and negative numbers for "outflows", or vice versa. Which
one you choose depends on your point of view -- and which way you find
more convenient at the time.

As to the reason why: the answer lies in the algebra of the math
formulas.

 

[Guest]

Thanks so much. I figured it was that. It makes sense for the payment
amount. But I don't understand the logic for making the present value
negative.