This time value of money Excel template can help you to calculate the following:
Present value is based on the time value of money concept – the idea that an amount of money today is worth more than the same in the future. In other words, the money that is to be earned in the future is not worth as much as an equal amount that is received today.
In the most basic form, would you rather receive $1,000 today or $1,000 in five years time? You’d obviously take the money today, based on two factors: interest/return rate and inflation/purchasing power.
For more analysis on present value and how investors can use it to measure and appraise companies, please read our article on present value.
You can also use our free present value calculator to quickly calculate the present value when you know the rate of return, number of periods, and the future value.