# PV Function in Excel

## 📘Part 1: Introduction

### 💡Definition

The PV Function calculates the present value of an investment based on constant payments and a constant interest rate.

### 🎯Purpose

It helps you determine how much future cash flows are worth in today’s value, assisting in investment analysis.

### ⌨️Syntax & Arguments

syntax
```=PV(rate, nper, pmt, [fv], [type]) ```

#### 🗂Arguments Explained

• Rate: Annual interest rate for the investment.
• Nper: The total number of payment periods.
• Pmt: The payment made each period.
• Fv: The future value remaining after the final payment (optional).
• Type: When payments are due; 0 for end-of-period, 1 for beginning-of-period (optional).

### 📊Return Value

This function will return the present value as a numerical figure.

### 📝Remarks

• The units for “Rate” and “Nper” should be consistent. For example, if “Rate” is monthly, then “Nper” should be in months.
• Usually, outflows are represented as negative values, while inflows are positive.

## Part 2: Examples

### Example 1: Calculating Present Value for Lease Payments

#### 🎯Purpose of Example

To evaluate whether leasing a new office space is a good financial decision.

#### 📊 Data Sheet and Formulas

ABCDEFG
RateNperPmtFvTypeFormulaResult
10.0512-120000`=PV(A1, B1, C1, D1, E1)`-\$11,358.24

#### 📚Explanation

The formula considers an annual interest rate of 5%, 12 payment periods (one per month), and monthly payments of \$1,200.

### Example 2: Early Investment Savings

#### Purpose of Example 🎯

To compare the present value of a savings plan with monthly deposits made at the beginning vs. the end of the period.

#### Data Sheet and Formulas 📊

ABCDEFG
RateNperPmtFvTypeFormulaResult
10.0324-100000`=PV(A1, B1, C1, D1, E1)`-\$23,116.18
20.0324-100001`=PV(A2, B2, C2, D2, E2)`-\$23,391.29

#### Explanation 📚

This example shows how early investment savings yield a higher present value (\$-23,391.29) when made at the beginning of the period (`Type 1`) compared to the end of the period (`Type 0`, \$-23,116.18).

### Example 3: Loan Repayment Plans

#### Purpose of Example 🎯

To analyze the present value of two different loan repayment plans.

#### Data Sheet and Formulas 📊

ABCDEFG
RateNperPmtFvTypeFormulaResult
10.0460-20000`=PV(A1, B1, C1, D1, E1)`-\$9,302.78
20.0460-20001`=PV(A2, B2, C2, D2, E2)`-\$9,427.28

#### Explanation 📚

The example illustrates how paying at the beginning of the period (`Type 1`, \$-9,427.28) gives a higher present value than paying at the end of the period (`Type 0`, \$-9,302.78).

## Part 3: Tips and Tricks

1. Type It Right: Make sure to specify the correct `Type` (0 or 1) to reflect the payment schedule accurately.
2. Optional FV: If you don’t input an `FV`, Excel assumes it’s zero.