Excel like a finance pro.
Financial function
PV
Returns the present value of a series of equal payments.
When to use it
The present value of a series of equal payments, or of a single future amount, at a constant rate. What a stream of money is worth today.
The shape of it
- Syntax
=PV(rate, nper, pmt, [fv], [type])
Worked examples
Loan from a payment
=PV(0.06/12,360,-1498.88) → 250,000.28
The loan a 1,498.88 payment supports; rounding in the payment explains the 28 cents.
Discount a single amount
=PV(0.05,10,0,-10000) → 6,139.13
10,000 received in ten years, discounted at 5%.
Value of an annuity
=PV(0.08,20,-50000) → 490,907.37
Twenty annual payments of 50,000 at 8%: the lump sum equivalent.
Worth knowing
- Enter payments as negative to get a positive present value.
- NPV handles uneven cash flows; PV needs equal ones.
- Lease versus buy: PV of the lease payments against the price.
Where it goes wrong
- Sign confusion produces negative present values.
- Rate per period must match nper.
Related
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