The Excel PV Function

Search this site: Custom Search

Related Functions:  FV Function NPV Function

Basic Description

The Excel PV function calculates the Present Value of an investment, based on a series of future payments.

The syntax of the function is :

Where the arguments are as follows:

Cash Flow Convention :

Note that, in line with the general cash flow convention, outgoing payments are represented by negative numbers and incoming payments are represented by positive numbers. This is seen in the examples below.

Excel Pv Function Examples

The spreadsheets below show examples of the Excel Pv function. In each case, the format of the function is shown in the spreadsheet on the left and the result is shown in the spreadsheet on the right.

Example 1

The following spreadsheet shows the Excel Pv function used to calculate the present value of an annuity that pays $1,000 per month for a period of 5 years. The interest is 5% per year and each payment is made at the end of the month.

Formula:

Result:

Note that, in this example :

• The payments are made monthly, so we have had to convert the annual interest rate of 5% into the monthly rate (=5%/12), and the 5-year period needs to be input as a number of months (=60)
• As the forecast value is zero, and the payment is to be made at the end of the month, the [fv] and [type] arguments can be omitted from the above function.
• As the initial investment is paid out, the calculated present value is a negative cash amount.

Example 2

The example below shows the Excel Pv function used to calculate the present value of an annuity that pays $2,000 per quarter for a period of 4 years. The interest is 10% per year and each payment is made at the start of the quarter.

Formula:

Result:

Note that, in this example :

• The payments are made quarterly, so we have had to convert the annual interest rate of 10% into the monthly rate (=10%/4), and the 4-year period needs to be input as a number of quarters (=16)
• Again the initial investment is paid out, and so the calculated present value is negative.

Further details and examples of the Excel Pv function are provided on the Microsoft Office website.

Pv Function Errors

If you get an error from the Excel Pv Function, this is most likely to be the #VALUE error: