At present, it is very important to know the **calculation of Present Value of Future Cash Flows**. If you want to invest somewhere, or you want to save money in every step you should know the** Present Value of Future Cash Flows. **So, in this article, I will show you **how to calculate the Present Value of Future Cash Flows.**

**Table of Contents**hide

## Download Practice Workbook

You can download the practice workbook from here:

## What Is Present Value of Future Cash Flows?

**Present Value (PV) of Future Cash Flows **is a process of discounting the cash which you expect to get in the future with a value of the current time. The **Present Value** may be greater than **future cash flows** or vice versa. Furthermore, the **Present Value** is less than the **future cash flow **for inflation.

## 4 Methods to Calculate Present Value of Future Cash Flows

To explain the **4 **methods on how to calculate the **Present Value** of **Future Cash Flows** in Excel, I will use the following dataset. Which has **Discount Rate, Time Period, **and** Future Cash Flow**.

### 1. Use of PV Function to Calculate Present Value of Future Cash Flows

Here, you can use **the PV function** to calculate the** Present Value of Future Cash Flows.** The steps are given below.

**Steps:**

- Firstly, you need to select a different cell
**D6**where you want to**calculate**the**Present Value**. - Secondly, use the corresponding formula in the
**D6**cell.

`=PV($C$4,B6,0,C6)`

**Formula Breakdown**

Here, the **PV **function will return the **Present Value** of an investment.

**C4**denotes**rate**as the annual interest rate. The**Dollar ($)**sign denotes that the value of the**C4**cell is fixed.**B6**denotes**NPER**as the total period of time.- As there is no Payment so
**PMT**will be**0**. **C6**denotes**FV**as the Future Cash Flow.

- Now, press
**ENTER**to get the**Present Value**.

Here, the **Minus** sign denotes that you need to keep this amount at any monetary institute.

- After that, you have to drag the
**Fill Handle**icon to**AutoFill**the corresponding data in the rest of the cells**D7:D10**.

At this time, you will see the following result.

- Now, you have to select the data range. Here, I have selected
**D5:D10.** - Then, from the
**Home**tab >> you should go to the**Number**feature. - After that, in the
**Number**feature >> Click on the**Drop-Down Arrow**>> At this time, you need to choose**Currency.**

- Finally, from the
**Number**feature >> you need to**Click two times**on**Decrease Decimal**to decrease the decimal.

- Now, you need to press the
**CTRL+1**keys to open the**Format Cells**dialog box directly.

Also, you can use the **Context Menu Bar** or the **Custom Ribbon** to go to the** Format Cells **command.

*First, select the***data range**>>**Right-Click**on the data >> choose the**Format Cells**option.

In the case of using **Custom Ribbon**,

*Select the***data range**>> from the**Home**tab >> go to the**Format**feature >> choose the**Format Cells**command.

After that, a dialog box named** Format Cells **will appear.

- Now, from that dialog box, you have to make sure that you are on the
**Number**command. - Then, you need to go to the
**Currency**option. - At this time, choose the
**second**option from the**Negative numbers**option. - Finally, press
**OK.**

Furthermore, to get the total Present value, I will use **the** **SUM function**.

- Firstly, you need to select a different cell
**D11**where you want to**calculate**the total**Present Value**. - Secondly, use the corresponding formula in the
**D11**cell.

`=SUM(D6:D10)`

- Finally, press
**ENTER**.

Here, the **SUM** function will return the **summation** of the data range **D6:D10**. At last, you will get the following** Present Value**.

**Read More: ****How to Apply Discounted Cash Flow Formula in Excel**

### 2. Applying NPV Function for Calculating Present Value

You can apply **the NPV function** to calculate the** Present Value of Future Cash Flows.** The steps are given below.

**Steps:**

- Firstly, you need to select a different cell
**C11**where you want to**calculate**the**Present Value**. - Secondly, use the corresponding formula in the
**C11**cell.

`=NPV(C4,C6:C10)`

**Formula Breakdown**

Here, the **NPV **function will return the net present value of an investment.

**C4**denotes the**discount rate**. Which is**5%**.**C6:C10**denotes the series of**FV**as the**Future Cash Flows**.

- Now, press
**ENTER**to get the**Net Present Value**.

**Read More: ****How to Calculate Future Value of Uneven Cash Flows in Excel**

**Similar Readings**

**How to Calculate Payback Period in Excel (With Easy Steps)****Cash Flow Statement Format in Excel for Construction Company****How to Calculate Present Value in Excel with Different Payments****How to Calculate IRR in Excel for Monthly Cash Flow (4 Ways)**

### 3. Employing Generic Formula to Calculate Present Value of Future Cash Flows

You can employ the **generic** formula to calculate the** Present Value of Future Cash Flows.**

**Steps:**

- Firstly, you need to select a different cell
**D6**where you want to**calculate**the**Present Value**. - Secondly, use the corresponding formula in the
**D6**cell.

`=C6/((1+$C$4)^B6)`

**Formula Breakdown**

- Here,
**C4**denotes**rate**as the annual**discount rate**. The**Dollar ($)**sign denotes that the value of**C4**cell is fixed. - Firstly, I have added
**1**with the discount rate.**Output: 1.05.**

- Secondly, the
**Power (^)**sign raises it to a fixed power which is the value of**B6**cell. Also, that is the time period.**Output: 1.05.**

- Finally, I divided the
**C6**cell value by**1.05.****Output: $3,809.52.**

- Now, press
**ENTER**to get the**Present Value**.

- After that, you have to drag the
**Fill Handle**icon to**AutoFill**the corresponding data in the rest of the cells**D7:D10**.

Furthermore, to get the total** Present Value**, I will use **the** **SUM Function**.

- Firstly, you need to select a different cell
**D11**where you want to**calculate**the total**Present Value**. - Secondly, use the corresponding formula in the
**D11**cell.

`=SUM(D6:D10)`

- Finally, press
**ENTER**.

Here, the **SUM** function will return the **summation** of the data range **D6:D10**. Lastly, you will get the following** Present Value**.

**Read More: ****How to Calculate Future Value of Uneven Cash Flows in Excel**

### 4. Using Generic Formula for Compound Interest

You can employ the **generic** formula to calculate the** Present Value of Future Cash Flows **in the case of **Compound Interest.** Let’s have the following data set.

The steps are given below.

**Steps:**

- Firstly, you need to select a different cell
**C9**where you want to**calculate**the**Present Value**. - Secondly, use the corresponding formula in the
**C9**cell.

`=C4/((1+C5/C7)^(C6*C7))`

**Formula Breakdown**

- Here,
**C5**denotes**rate**as the**annual discount rate**. - Firstly, I have divided the cell value of
**C5**by Compounding year or**C7**cell value.- Output:
**0.016666667.**

- Output:
- Secondly, I have added
**1**with the result.**Output: 1.016666667.**

- Thirdly, I have multiplied C6 with C7.
**Output: 15.**

- Fourthly, the
**Power (^)**sign raises it to a fixed power.**Output: 1.281382444.**

- Finally, I divided the
**C4**cell value by the**output.****Output:$13,423.00 .**

- Now, press
**ENTER**to get the**Present Value**.

**Read More: ****How to Calculate Present Value of Uneven Cash Flows in Excel**

## 💬 Things to Remember

- Try to avoid generic formulas as there are built-in functions
**to calculate the Present Value of Future Cash Flows.**

## Practice Section

Now, you can practice the explained method by yourself.

## Conclusion

I hope you found this article helpful. Here, I have explained **4 **methods to** Calculate Present Value of Future Cash Flows.** You can visit our website **Exceldemy** to learn more Excel-related content. Please, drop comments, suggestions, or queries if you have any in the comment section below.

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