Pv Ratio In Excel

APPLICATION OF P.V. RATIO

What is P.V. Function ? In Excel, the PV function returns the present value of an investment based on an interest rate and a constant payment schedule.  It’s Syntax requires-:  Interest rate for investment,  Number of payments,  Amount of payment for each period,  Future value of payment.

APPLICATION Should Mr.X pay Rs11,000 today for a machine or Rs3,000 a year for 5 years? In this question we need to compare two investments, and find out which one would be better, To find out let us assume that here cost of capital is 12% per annum.

 The Syntax of P.V. Function is-: Number of periods In the annuity.

It is the interest Rate per period.

Payment made each period.

Required Future Value.

It indicates when the Payment is made, it is Either 0 or 1.

SPREADSHEET

CONCLUSION Therefore it can be inferred that making payments at the end of the year is a better deal than paying out Rs11,000 today.

Aayush Agnihotri-17/069