How to Calculate Present Value with PV in Excel

Decide between a lottery lump sum and 20 annual payments by valuing future payments in today’s dollars.

You will learn to

• Value a stream of equal payments today
• Handle payments at the start of each period
• Compare an annuity with a lump sum

How it works

PV(rate, nper, pmt, [fv], [type]) tells you what a series of future payments is worth today. =PV(5%,20,-50000) values twenty yearly payments of $50,000 at a 5% discount rate — about $623,111.

If the first payment arrives immediately (an annuity due), add type 1: =PV(5%,20,-50000,0,1). Compare the result with any lump-sum offer: the higher present value is the better deal at that discount rate.

=PV(B4,B3,-B2)