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This time value of money Excel template can help you to calculate the following:

Present value is based on the time value of money concept – the idea that an amount of money today is worth more than the same in the future. In other words, the money that is to be earned in the future is not worth as much as an equal amount that is received today.

In the most basic form, would you rather receive $1,000 today or $1,000 in five years time? You’d obviously take the money today, based on two factors: interest/return rate and inflation/purchasing power.

For more analysis on present value and how investors can use it to measure and appraise companies, please read our article on present value.

You can also use our free present value calculator to quickly calculate the present value when you know the rate of return, number of periods, and the future value.

FAQs

1. What is a Present Value?

Present value is the current worth of a future sum of money or stream of cash flows.

2. How do you calculate the Present Value?

The formula for present value is: PV= FV / (1+r)^n, where PV=Present Value, FV=Future Value, r=interest rate per period in decimal form, n=number of periods/years you plan to hold onto your investment.

3. What is a Future Value?

Future value is the amount of money you will have at a certain point in time, taking into account any compounding interest.

4. How do you calculate the Future Value?

The formula for future value is: FV= PV (1+r)^n, where r= interest rate per period in decimal form and n= number of periods/years you plan to hold onto your investment.

5. What are the differences between present value and future value?

Present value is the current worth of a future sum of money or stream of cash flows. While future value is the amount of money you will have at a certain point in time, taking into account any compounding interest.

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