I have already created a cumulative increase calculator that gives me a cost after a number of years where a fixed interest rate is applied each year.
This is based on;
Inflated rate = base cost X (1 + interest rate) ^ Years
e.g. £500 * (1 + 0.04) ^ 5 = £608.33 {assuming 4% interest over 5 years}
or £500 * (1 + 0.04) ^ 25 = £1332.92 {assuming 4% interest over 25 years} etc
I would like to be able to calculate in the opposite direction. If I know that the current cost is £608.33 and that 4% interest was applied each year for 5 years, what was the base cost? How do I calculate backwards to the £500?
I know that I can calculate the nth root by using (current cost)^(1 / Years) but that doesn't take into account any cumulative increase that has been applied. Can anyone help as I'm getting tied in knots!
Many thanks
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