Function Manager Financial Date & Time More Functions Create from Selection Function Library Defined Names D17 B D E F G H 6% 2. 3 4 5 1 Annuity Present Value 2 3 Inputs 4 Payment $ 80.00 5 Discount Rate/Period 6 Number of Periods 5 7 8 Present Value using a Time Line 9 Period 0 1 10 Cash Flows 0 11 Present Value of Each Cash Flow 12 Present Value 336.99 13 14 Annuity Present Value using the Formula 15 Present Value 336.99 16 17 Annuity Present Value using the PV Function 18 Present Value 336.99 19 20 Single-FV Annuity-FV Single-PV Annuity-PV Loan An annuity pays $80.00 each period for 5 periods. For these cash flows, the appropriate discount rate period is 6.8%. What is the present value of this annuity? Use worksheet "Annuity-PV". 1. This problem is like Future Value Problem 2. Note that in a Present Value, you put the payment in the last period (Period 5 in this case). 1. You will have a cash flow each period except for Period 0. 2. Select the Annuity-PV worksheet. 1. First, input the given data. Putting the data in the cells B4, B5, & B6 allows us to make changes later when circumstances change. 2. Next, work on the Present Value Using a Timeline. 1. Remember that in an annuity, the Cash Flow in Period 0 is 0. 2. You will have a cash flow in the other periods. 3. Text formula for Present Value Using a Timeline 1. Equals (Cash Flow)/((1 + (Discount Rate/Period))^(Period)) 1. (Cash Flow) in a timeline always means the Current Cash Flow. The formula can be written either way. 2. (Period) in a timeline always means the Current Period. The formula can be written either way. 4. Remember that you will be copying this formula, so use absolute cell references when you do not want the value to change and relative cell references when you do. 5. The sum belongs in cell B12. 6. The answer is $336.99 (for each part of this problem) 7. Click the floppy disk icon in the navigation bar to save the file. 3. Create the Annuity Present Value formula in cell B15. 1. Select cell BIS 2. Text formula for Present Value 1. Equals (Payment) * (1 - ((1 + (Discount Rate/Period))^(-Number of Periods)))/ (Discount Rate/Period) 3. Click the floppy disk icon in the navigation bar to save the file. 3. Use the function PV in cell B18. 1. Click the floppy disk icon in the navigation bar to save the file