A Present Value Interest Factor Calculator
A Present Value Interest Factor (PVIF) is a factor that is used to calculate the present value of a future value or payment. Often presented in the form of a table, PVIFs help to simplify the calculation through the application of period and interest rate combinations.
Present value calculations are commonly used in business and by economists to evaluate projects and cash flows.
What is Present Value?
Present value is the discounted value of some future payment or series of future payments. A discount is applied to apply the time value of money, investment risk, and other factors that may impact an investment or project decision. Determining a suitable discount rate is the key to appropriately valuing future cash flows.
About the Time Value of Money
Time value of money is the concept that money that you have access to today is worth more than that same amount of money in the future due to the potential earning capacity that money offers. Under the theory, you are better off with the money today as it gives you the opportunity to invest or pay down debts.
Calculate the Present Value Interest Factor
The formula for the present value interest factor can be written as:
PVIF = 1 / (1+r)^t
Where:
r = discount rate
t = number of periods
As an example, if you are expecting to receive $10,000 in five years with a current discount rate of 8%, the PVIF would be 0.6806. This would lead to a present value of $6,806.
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The above information is educational and should not be interpreted as financial advice. For advice that is specific to your circumstances, you should consult a financial or tax advisor.
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