## Quick Intro

**Want to check if your investment is profitable? Use PV Function. ****It will help you to determine that an investment is profitable or not.**

PV Function is one of the multi-usage functions in excel. You can use it to calculate the present value of a financial investment or a loan.

And, in the case of a loan, you can get the actual present value of a loan you can afford to pay in monthly payments. For using PV function in excel, you need a constant interest rate, constant periodic payments.

Let’s say if you have to pay $2000 every year for next 20 years to get $50000 at the end of 20 years. It will tell you that it’s profitable or not.

## Syntax

**PV(rate, nper, pmt, [fv], [type])**

**rate**The rate of interest for the payment of the loan.**nper**Total number of payment periods**pmt**A constant amount of payment you have to make after every period.**[FV]**The future value or a cash balance of a loan or an investment you want to attain after the last payment is made. If omitted, it will b assumed as 0.**[type]**Time of the payment. Beginning of the period (use “0”) or end of the period (Use “1”).

## More Information on Excel PV Function

- The units you use as arguments should be consistent. For example, If you are using periods in months (36 Months = 3 Years) then you have to convert the annual interest rate into a monthly interest rate (6%/12 = 0.5%).
- PV function is an annuity function.
- In annuity functions, the cash payments by you are represented by negative numbers and the payments you receive are represented by positive numbers.

## Example

Let’s say you want to invest $4000 in an investment plan and in return, you’ll get $1000 at the end of each year for next 5 years.

That means you’ll get total $5000 in next 5 years.

Now, the thing is, you have to evaluate that this investment is profitable or not. As you are investing $4000 today and the return will come to you in next 5 years.

Here, we are using 5% as an interest rate.

In above calculation, when we used PV function it has returned -4329.

So, here the present value of your investment is $4329 and you are investing $4000 for it. Hence, your investment is profitable.

**Quick Tip:** If the present value of the investment(inflows) is greater the cost of the investment, the investment is a good one.

## Sample File

## What’s Next?

To learn more about Excel PV Function you can check Microsoft’s Help Section. And, if you have a unique idea to use it, I would love to hear from you.

There are also you have FV | PMT functions which are highly useful. Apart from this, I have a list of excel functions and some real life formulas examples.

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