How do I calculate present value of a single sum?

[Carmen]

Excel has a built in formula for calculating present value of an annuity
(series of payments), but I am looking forward to finding a way to calcuate
present value of a single sum (such as a note that accrues interest but is
only paid at the end of the period - therefore only paid once).

Thanks

 

[N Harkawat]

=future_payment/((1+r)^n)
where r is the rate of interest and n is the number of periods.

for instance present value of 120 three years from today = 120/1.03^3 =
109.81

 

[Carmen]

Is this something in one of the add-in packages? I tried the formula and it
gives me a #NAME? error.

Thanks for your help!

 

[N Harkawat]

What I mean by Future_payment is the cell which holds the future value
so your formula really should have been

=A1/(1+B1)^C1

where cell A1 = future_payment
B1 = rate of interest per period
C1 = number of periods

There is as such no formula for the PV for a single cash flow

 

[Duke Carey]

You are referring to the NPV() function. Take a look at the PV() function
instead, and remember that your result will have a sign opposite of the one
you give the final payment. So...if you expect to receive a $100 payment in
5 years, you will get a negative result, indicating what you'd have to pay
OUT today to get that $100.

Duke

 

[Carmen]

This doesn't work either, already tried that.

You are referring to the NPV() function. Take a look at the PV() function
instead, and remember that your result will have a sign opposite of the one
you give the final payment. So...if you expect to receive a $100 payment in
5 years, you will get a negative result, indicating what you'd have to pay
OUT today to get that $100.

Duke

 

[Carmen]

Thanks, that gave me what I needed.

What I mean by Future_payment is the cell which holds the future value
so your formula really should have been

=A1/(1+B1)^C1

where cell A1 = future_payment
B1 = rate of interest per period
C1 = number of periods

There is as such no formula for the PV for a single cash flow

 

[Duke Carey]

Carmen -

Not sure what you mean by it "doesn't work either."

It works fine on my PC. Are you suggesting you get an error, an erroneous
result, or something else entirely?

Are you posing your question here - and in Excel - accurately?

 

[Carmen]

It doesn't calculate the answer that I am looking for. Someone else already
responded with a formula that does what I need, thanks for your help though.

 

[Duke Carey]

"There is as such no formula for the PV for a single cash flow"

=PV(0.03,3,,-120) = 109.82