How to calculate Present Value in MS Excel 2007

1. Suppose followings are the cash flows

Cash Flows
1500 2100 1545 1987 2500 2. The discount rate is 15%. 3. Write the cash flows in a column for example in column C starting from C5 to C9. 4. Now at a cell (e.g. in E5) write the following formula

=PV(0.15,5,C5:C9)
5. Now Press ENTER button and you will get the present value (Notice that the figure is red in color and has a negative sign like the following figure. It is a built-in function in Excel. If you need a positive figure just multiply the figure with -1 in another cell and use it.)

6. Explanation of the formula a. Here, after parenthesis first you have to write the rate at which the cash flows will be discounted in decimal form. (E.g. in the example it is 15% so we use .15) b. Then after a comma you have to give the number of period or the number of payment made. (e.g. as we have 5 cash flows we use 5)

Tutorial made by Shamsuddin Chowdhury Delwar

c. Then you have to select the cash flows. (as our cash flows were in cell C5 to C9, we use C5:C9) d. After that you have to give the amount that you will get at the last period (for example if there is any principal repayment) addition to the normal cash flows (for example interest payment each year). In our example we do not use this amount as we assume there is no such payment. e. So, the final formula is

=PV(rate, number of payment made, cash flows, principal amount)

Tutorial made by Shamsuddin Chowdhury Delwar

MS Excel Present Value

Tutorial made by Shamsuddin Chowdhury Delwar