### 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.

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

**Formula Breakdown**

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.

- 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.

`=SUM(D6:D10)`

- 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.

`=NPV(C4,C6:C10)`

**Formula Breakdown**

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.

- 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.

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

**Formula Breakdown**

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

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

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

- 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.

`=SUM(D6:D10)`

- 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.

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

**Formula Breakdown**

**C5**denotes rate as the annual discount rate.- We divided the cell value of
**C5**by Compounding year or**C7**cell value.- Output:
**0.016666667.**

- Output:
- We added
**1**with the result.**Output: 1.016666667.**

- We multiplied C6 with C7.
**Output: 15.**

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

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

- 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**.**

## Download Practice Workbook

You can download the practice workbook from here:

**Related Articles**

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