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The current worth of a predicted future stream of cash flow is called the present value (PV). Using Microsoft Excel, you can rapidly compute the present value. In Excel, the formula for calculating PV is =PV (rate, nper, pmt, [fv], [type]).

Any interest rate that an investment may receive is factored into the present value. For instance, if an investor receives $1,000 today and earns a 5% annual rate of return, the $1,000 today is unquestionably worth more than $1,000 five years from now.

The PMT function in Excel is a financial function that calculates a loan payment based on a fixed interest rate, the number of periods, and the loan amount. PMT stands for "payment," which is how the function got its name.

  • Net Present Value (NPV) = Cash flow / (1 + i)t – original investment
  • NPV = Present Value of Expected Cash Flows + Present Value of Invested Cash Flows
  • Return on investment (ROI) = (total benefits – total expenses) / total costs.

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