# 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.
`=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.
• 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.

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Musiha Mahfuza Mukta

Musiha Mahfuza Mukta is a marine engineer who loves exploring Excel and VBA programming. To her, programming is a time-saving tool for dealing with data, files, and the internet. She's skilled in Rhino3D, Maxsurf, C++, MS Office, AutoCAD, and Excel & VBA, going beyond the basics. With a B.Sc in Naval Architecture & Marine Engineering from BUET, she's shifted gears and now works as a content developer. In this role, she creates techy content exclusively focused on Excel... Read Full Bio

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