Calculating the present value of an investment enables you to answer this question: how much is a proposed investment worth in today’s dollars? You can answer that question using the PV function. Once you establish a discount rate, which you and your colleagues should reevaluate frequently to account for changes in the market, you can run the numbers and arrive at a clear yes or no decision.
- [Voiceover] Calculating the present value…of an investment enables you to answer this question,…How much is a proposed investment worth in today's dollars?…You can answer that question using the PV…or Present Value function.…In many ways the PV function is the opposite…or the complement of the FV function.…Instead of asking about the future value of an investment,…what it will be worth when it's done,…or asking how much we should pay…for the investment today in present-day dollars…to get the return that is promised by the investment.…
I'll demonstrate how to use the PV function.…My sample file is PV_03_03…and you can find it in the chapter three folder…of the Exercise Files collection.…I have a number of arguments,…the first is the Discount Rate.…The Discount Rate is the amount of money…or the interest that you could earn at zero risk…based on other investments.…So for example, if you have perhaps AAA-municipal bonds…or something else that pays out at 6%…and you're 100% certain or as close as possible to 100%,…
- Analyzing loans, payments, and interest
- Calculating depreciation
- Determining values and rates of return
- Calculating bond coupon dates and security durations
- Calculating security prices and yields
- Calculating prices and yields of securities with odd periods
Skill Level Intermediate
1. Analyzing Loans, Payments, and Interest
2. Calculating Depreciation
3. Determining Values and Rates of Return
4. Calculating Bond Coupon Dates and Security Durations
5. Calculating Security Prices and Yields
6. Calculating Prices and Yields of Securities with Odd Periods
Additional resources1m 24s
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