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5 Flow Formula to calculate the present value of a lump sum to be received after some future periods: 5 P inancial Management, 12e n

5 Flow Formula to calculate the present value of a lump sum to be received after some future periods: 5 P inancial Management, 12e n (1 + i)" = F [(1 + i) "] The term in parentheses is the discount factor or present value factor (PVF), and it is always less than 1.0 for positive i, indicating that a future amount has a smaller present value. PV = F x PVFni In MS Excel use pv function PV(rate,nper,pmt, fv, type) IM Pandey P Pearson Example Suppose that an investor wants to find out the present value of Rs 50,000 to be received after 15 years. Her interest rate is 9 per cent. First, we will find out the present value factor, which is 0.275.

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