# Performing Financial Calculations

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## Taking Inflation into Account

When discussing the future value of an investment, it's always wise to take inflation into account. Even a low rate of 1% or 2% can erode the value of money over a long period.

To take inflation into account, use the following general formula:

PV = FV / (1 + IR)NP

Here, IR is the inflation rate and NP is the number of years into the future that you want to check. Here's the JavaScript version:

`PV = FV / (Math.pow(1 + IR, NP)`

Listing 5 calculates the present value of \$500,000 in 20 years, assuming a 2% inflation rate.

#### Listing 5: Taking Inflation into Account

```<script language="JavaScript" type="text/javascript">
<!--

function inflation_factor(FV, IR, NP) {
var PV = FV / (Math.pow(1 + IR, NP))
return round_decimals(PV, 2)
}

function round_decimals(original_number, decimals) {
var result1 = original_number * Math.pow(10, decimals)
var result2 = Math.round(result1)
var result3 = result2 / Math.pow(10, decimals)
return (result3)
}

var future_value = 500000
var inflation_rate = 0.02
var years_from_now = 20