... The effect of compounding is small for a small number of periods, but increases as the number of periods increases (Simple interest would have a future value of $1,250, for a difference of $26.28.) ... between earlier money and later money Discount rate Cost of capital Opportunity cost of capital Required return or required rate of return Future Values Suppose you invest $1,000 for one ... why can’t we go backward in time to the present (PV)? We can! As a matter of fact, finance uses the process of moving future funds back into the present when we value financial instruments...