PV

Syntax

PV (Rate, NPer, Pmt, FV, {Type})

Description

The PV function returns the Present Value of an investment with a future value of FV, where Pmt is received for NPer periods and is discounted at the rate of Rate per period. If Type is omitted or zero, PV assumes that the investment is an ordinary annuity. If Type is nonzero, PV assumes that the investment is an annuity due.

Note:

Enter negative amounts for money out of your pocket, or positive amounts for money coming to you.

Example

Suppose that a machine that sells for 80000 USD saves your company 11000 USD a year for 10 years. Assuming that the money saved could be invested at 8 percent per year, you can calculate the PRESENT_VALUE cube as follows:

PV(0.08, 10, 11000, 0) = -73811

The present value of the machine is 73811 USD, indicating that you might be better off investing the 80000 USD in another way. But suppose that you can sell the machine for 30000 USD at the end of the 10 years. You can calculate the PRESENT_VALUE cube as follows:

PV(0.08, 10, 11000, 30000) = -87707

In this case, the present value is higher than the cost of the machine, indicating a profitable investment.