How to Calculate Present Value of Future Cash Flows: 4 Methods

Method 1 – Use of PV Function to Calculate Present Value of Future Cash Flows

Steps:

• Select a different cell, D6, where you want to calculate the present value.
• Use the corresponding formula in the D6 cell.

• Press ENTER to get the Present Value.

The Minus sign denotes that you must keep this amount at any monetary institute.

• You must 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.

•  Select the data range. Here, I have selected D5:D10.
• From the Home tab >> you should go to the Number feature.
• In the Number feature >> Click the Drop-Down Arrow >> Choose currency.

• From the Number feature >> you need to Click two times on decrease decimal to decrease the decimal.

• Press the CTRL+1 keys to open the Format Cells dialog box directly.

Use the Context Menu Bar or the Custom Ribbon to go to the Format Cells command.

• 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.

• From that dialog box, you have to make sure that you are on the Number command.
• Go to the Currency option.
• Choose the second option from the Negative numbers option.
• Press OK.

Get the total Present value, I will use the SUM function.

• Select a different cell, D11, where you want to calculate the total Present Value.
• Use the corresponding formula in the D11 cell.

• Press ENTER.

The SUM function will return the summation of the data range D6:D10. Get the following present value.

Method 2 – Applying NPV Function for Calculating Present Value

Steps:

• Select a different cell, C11, where you want to calculate the present value.
• Use the corresponding formula in the C11 cell.

• Press ENTER to get the Net Present Value.

Method 3 – Employing Generic Formula to Calculate Present Value of Future Cash Flows

Steps:

• Select a different cell D6 where you want to calculate the Present Value.
• Use the corresponding formula in the D6 cell.

• Press ENTER to get the present value.

• Drag the Fill Handle icon to AutoFill the corresponding data in the rest of the cells D7:D10.

Get the total present value, I will use the SUM function.

• Select a different cell, D11, where you want to calculate the total present value.
• Use the corresponding formula in the D11 cell.

• Press ENTER.

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

Method 4 – Using Generic Formula for Compound Interest

Steps:

• Select a different cell, C9, where you want to calculate the present value.
• Use the corresponding formula in the C9 cell.

• Press ENTER to get the present value.

Things to Remember

Try to avoid generic formulas as there are built-in functions to calculate the present value of future cash flows.

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