Present Value Factor?

[spieldberg]

Hello,

If you are doing DCF, and you have a 10 year stream of income, how/where do you determine the Present Value Factor? :blink:

Thanks

 

[PL1957]

Hello,

If you are doing DCF, and you have a 10 year stream of income, how/where do you determine the Present Value Factor? :blink:

Thanks

I usually use Excel to calculate it, but sometimes check it on my 12C. If I feel especially anal, I check that in my AIREA Financial Tables book ...

 

[spieldberg]

Thanks - I'm looking for an example of how it is calculated - how do you do it?

 

[PL1957]

Thanks - I'm looking for an example of how it is calculated - how do you do it?

There's a present value function in Excel. You simply enter in the interest rate, the number of periods and the future value to arrive at the present value. If you are looking for the PV of a dollar, you enter "-1" for the future value.

 

[Serge Paquette]

PV factor calculation: PV Factor = 1/(1+I)^n

I: Discount rate (compounded annually)
n: Number of years that you are discounting the cash flow

Each annual cash flow will have a different PV factor

 

[Howard]

Hello,

If you are doing DCF, and you have a 10 year stream of income, how/where do you determine the Present Value Factor? :blink:

Thanks

Actually, if it's a 10 year stream of income it's the PV of 1 per period factor. Other than using Excel, you can:

1. Look it up in a set of tables (column 5)

2. Calculate it with your HP12c

PMT = 1, Annual Interest Rate = i = ?, Years = n = 10
Solve for PV


3. Calculate it using the formulas

PV1/pd = (1 - (1+i) to the n th power) / i

(Edited to clarify..... the assumption above is even payments. If payments are not equal, you do have to calculate the PV1 factor for each year's payment).

 

[Howard]

Hello,

If you are doing DCF, and you have a 10 year stream of income, how/where do you determine the Present Value Factor? :blink:

Thanks

To the original poster, sorry........just noticed you are not an appraiser. You may not have access to the tools we use.

Go to Office Depot or Staples and get yourself an Hewlett Packard HP12c financial calculator. Not expensive and easy to use.

 

[JT1974]

Hello,

If you are doing DCF, and you have a 10 year stream of income, how/where do you determine the Present Value Factor? :blink:

Thanks

Are you asking how to determine the appropriate Discount Rate or are you asking how to do the math?

 

[Stone]

There's a present value function in Excel. You simply enter in the interest rate, the number of periods and the future value to arrive at the present value. If you are looking for the PV of a dollar, you enter "-1" for the future value.

I've never done that with Excel (stupid, I suppose). Thanks.

 

[Pittsburgh Pete]

I've never done that with Excel (stupid, I suppose). Thanks.

Hardly!!! Easy to factor into an excell spreadsheet with the formulas indicated in an earlier post. I always make the calculations a function of a separate field where you can input the discount rate--then if you want to experiment with different discount rates, you only have to change the one field.