TIME VALUE OF MONEY
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A
SPREADSHEET FUNCTIONS
Given the number of periods (or number of payments), any two of the following determine
the third: present value, cash flow, discount rate. Be careful about the signs!
1. The present value is computed as PV(interest rate, # of periods, cash flow).
Discount rate
Number of periods
Cash flow
Present value
10%
5
1,000
(3,791)
2. The present value can also be computed as NPV(interest rate, series of cash flows).
Year
Cash flow
PV of cash flows
1,000
1,000
1,000
1,000
1,000
3,791
3. The cash flow is computed as PMT(discount rate, # of periods, present value).
Discount rate
Number of periods
Present value
Cash flow
10%
5
3791
(1,000)
4. The discount rate is computed as IRR(series of present value and cash flows).
Year
Cash flow
Internal rate of return
(3,791)
10%
1,000
1,000
1,000
1,000
1,000
Page 1
1 A FUTURE VALUE OF LUMP SUMP
Inputs
Rate
# of Periods
Pmt
Present Value
Type
Outputs
Future Value
Formula
8%
5
0
-1000
$1,469.33
5%
5
0
-1000
$1,276.28
=FV(rate,nper,0,pv)
11%
5
0
-1000
$1,685.06
8%
10
0
-1000
$2,158.92
(using 0 for pmt)
2 A FUTURE VALUE OF ANNUITY ORDINARY
Inputs
Payment
# of Periods
Interest Rate
1000
5
7%
Outputs
Future Value
($5,750.74)
Formula
$5,750.74
=FV(rate,nper,pmt)
(no pv reqd)
3 A FUTURE VALUE OF ANNUITY DUE
Inputs
Payment
# of Periods
Interest Rate
Present Value
Type
Outputs
Future Value
Formula
1000
5
7%
0 DUMMY
1
($6,153.29)
-$6,153.29
$6,153.29
=FV(rate,nper,pmt,0,type)
(using 0 for pv)
4 A FUTURE VALUE OF MIXED STREAM
Inputs
Payment
Interest Rate
400
9%
800
500
400
300
# of Periods
Outputs
Net Present Value
Future Value
Formula
Formula
$1,904.76 (cannot use PV formulae, it does not accommodate mixed cash flow streams)
($2,930.71)
=NPV(rate,value1,value2,..)
=FV(rate,nper,0,pv)
(using 0 for pmt)
1 B PRESENT VALUE OF LUMP SUMP
Inputs
Rate
# of Periods
Pmt
Future Value
Type
Outputs
Present Value
Formula
8%
5
8%
5
11%
5
-1000 ($1,469.33)
-1000
$680.58
$1,000.00
=PV(rate,nper,0,fv)
$593.45
(using 0 for pmt)
2 B PRESENT VALUE OF ANNUITY ORDINARY
Inputs
Payment
# of Periods
Interest Rate
Outputs
Present Value
Formula
7000
5
8%
1000
5
7%
($27,949)
($4,100)
=PV(rate,nper,0,fv)
$4,100.20
(using 0 for pmt)
3 B PRESENT VALUE OF ANNUITY DUE
Inputs
Payment
# of Periods
Interest Rate
Present Value
Type
Outputs
Future Value
7000
5
8%
1000
5
7%
0
1
($30,185)
-30184.89
($4,387.21)
4 B PRESENT VALUE OF MIXED STREAM
Inputs
Payment
Interest Rate
4000
9%
8000
5000
cash flow streams)
Outputs
Net Present Value
Formula
$19,047.58
(cannot use PV formulae, it does not accommodate mixed ca
=NPV(rate,value1,value2,..)
8%
8
-1700
$918.46
$4,387.21
4000
3000
, it does not accommodate mixed cash flow streams)
Annuity Calculations
Inputs
Payment
Discount Rate / Period
Number of Periods
Present Value
Payment
Payment Using PMT Function
Discount Rate / Period
Discount Rate Using Rate Function
Number of Periods
Num of Periods Using the NPER Function
Find the future value
Find the present value
Payment of an annuity
Number of periods
Yield of an annuity
Present value of unequal cash flows
Find the yield of unequal cash flows
Raise e to a power
80.00
6%
5
$336.99
$80.00
6%
In solving for the Payment, use the formula and PMT function
In solving for the Discount Rate / Period, use the RATE function
In solving for the Number of Periods, use the NPER function
FV(RATE, NPER, PMT, PV,TYPE)
PV(RATE, NPER, PMT, FV,TYPE)
PMT(RATE, NPER, PV, FV,TYPE)
NPER(RATE, PMT, PV, FV,TYPE)
RATE(NPER, PMT, PV, FV,TYPE,GUESS)
NPV(RATE,VALUE1,VALUE2,)
IRR(VALUES,GUESS)
EXP(NUMBER)
PMT function
RATE function
ER function
Rate
Year
10%
Simple Annual Interest
Compounded Annually
100
110
120
130
140
150
160
170
180
190
200
210
220
230
240
250
260
270
280
290
300
0
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
100
110.0
121.0
133.1
146.4
161.1
177.2
194.9
214.4
235.8
259.4
285.3
313.8
345.2
379.7
417.7
459.5
505.4
556.0
611.6
672.7
800
700
600
500
400
300
200
100
0
Year
Simple Annual Interest
10
Compounded Annually
11
12
Com
Compounded Monthly
Compounded
Continuously
100
$110.47
$122.04
$134.82
$148.94
$164.53
$181.76
$200.79
$221.82
$245.04
$270.70
$299.05
$330.36
$364.96
$403.17
$445.39
$492.03
$543.55
$600.47
$663.35
$732.81
10
ded Annually
11
12
13
14
Compounded Monthly
100
15
16
17
18
19
