Syntax
PV(rate, nper, pmt, [fv], [type])
| Parameter | Description |
|---|---|
| rate | Parameter of the PV function. |
| nper | Parameter of the PV function. |
| pmt | Parameter of the PV function. |
| [fv] | (Optional.) Parameter of the PV function. |
| [type] | (Optional.) Parameter of the PV function. |
Examples
Value of an annuity
Formula
=PV(0.05/12, 240, -1000)
$151,525.22. Receiving $1,000/month for 20 years is worth about $151,525 today at a 5% discount rate.
Lottery lump sum comparison
Formula
=PV(0.06/12, 360, -2778)
$464,102.33. Getting $2,778/month for 30 years ($1M total) is only worth about $464K in today's dollars at 6%.
Present value of a future lump sum
Formula
=PV(0.04, 10, 0, -100000)
$67,556.42. A $100,000 payout in 10 years is worth about $67,556 today at 4% annual discount.
Common Errors
#VALUE!
A non-numeric value was provided for one of the arguments.
#NUM!
Arguments produce an undefined result, such as zero periods with a future value.
Tips
Comparing lump sum vs annuity
If offered a choice between $500K now or $3,000/month for 20 years, use PV to value the annuity. If PV > $500K, the annuity is the better deal.
Inflation adjustment
Use the real interest rate (nominal rate minus inflation) as the rate argument to get present value in real purchasing-power terms.
Sign convention
Cash you pay out is negative, cash you receive is positive. Enter payments as negative to get a positive present value, or vice versa.
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