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APPLICATION

OF
P.V. RATIO
What is P.V. Function ?
In Excel, the PV function returns the
present value of an investment based on
an interest rate and a constant payment
schedule.

 It’s Syntax requires-:


 Interest rate for investment,
 Number of payments,
 Amount of payment for each period,
 Future value of payment.
APPLICATION
Should Mr.X pay Rs11,000 today for a
machine or Rs3,000 a year for 5 years?

In this question we need to compare two


investments, and find out which one would
be better,
To find out let us assume that here cost of
capital is 12% per annum.
 The Syntax of P.V. Function is-:
Number of periods
In the annuity.

It is the interest
Rate per period.

Required Future It indicates when the


Value. Payment is made, it is
Payment made Either 0 or 1.
each period.
SPREADSHEET
CONCLUSION

Therefore it can be inferred that


making payments at the end of the
year is a better deal than paying out
Rs11,000 today.
Aayush Agnihotri-17/069