Present Value?

[Eamon]

Hi,

I have a worksheet as follows...

A5: Annual Interest rate, B5: 5%
A6:Number of Years of Investment B6: 3
A7: Future Value $7,800,000

A9: Present Value B9:??????

How can I add a function in cell B9: to calculate the present value?

Regards,
Eamon

 

[Norman Harker]

Hi Eamon!

=PV(B5,B6,0,B7,0)
Returns: -6737933.26854551

The negative indicates Excel use of a sign of money flows convention
and a deposit of 6737933 is required to secure a return of 7800000

Since no payments are involved you could use a direct formula:

=B7*(1+B5)^-B6
Returns: 6737933.26854551


--
Regards
Norman Harker MVP (Excel)
Sydney, Australia
(e-mail address removed)
Excel and Word Function Lists (Classifications, Syntax and Arguments)
available free to good homes.

 

[Eamon]

Hi Norman,

I used "=PV(B5,B6,0,B7,0)" before I posted but as I was getting a negative I
though something was wrong, appreciate the comments you made on this and
thanks for your help,much appreciated.

Best regards,
Eamon

 

[Norman Harker]

Hi Eamon!

Those negatives in arguments and returns can be confusing. Just
remember to adopt a persona (e.g. borrower or lender) and sign the
arguments according to whether the money flows away from them
(negative) or towards them. Similarly with the interpretation of the
returns from the financial functions; positive and it's a receipt or
right to receive; negative and it's a payment out or an obligation to
pay.

The sign convention used is the same as that used by financial
calculators.
--
Regards
Norman Harker MVP (Excel)
Sydney, Australia
(e-mail address removed)
Excel and Word Function Lists (Classifications, Syntax and Arguments)
available free to good homes.