Do you know that the money you have now is worth more than the same amount a few years from now?
The value of money depreciates with time, this is why smart business people invest their money instead of saving it. When you save your money for a while, the value of the money drops every day.
Investing your money is a good decision because you get some percentage increase even if the actual money that you invested depreciates.
Imagine you have a considerable amount of money that you want to invest to receive interest on the money on a future date. As a smart person, would you not love to know the present value of the money that you are going to get in a future time?
This is where the PVIF (Present Value Interest Factor) comes in; okay let us take one step at a time.
What is PVIF (Present Value Interest Factor)
The present value interest factor (PVIF) is a factor or a formula that used to estimate the present worth of a sum of money that will be received at some future date.
The PVIF (Present Value Interest Factor) is based on the time value of money.
PVIF (Present Value Interest Factor) calculator
Since you have decided to invest your money, then it would be cool for you to know what the value of your money will be at a future date.
There is a formula for calculating the PVIF (Present Value Interest Factor). The formula is:
PVIF= a/ (1+r)
Where:
a= is the future sum to be received
r= is the discount interest rate
n= is the number of years or other periods
This is the formula for calculating PVIF (Present Value Interest Factor), but you don’t need to go through the rigours of manually calculating the PVIF with the formula. You can simply use the PVIF (Present Value Interest Factor) calculator above.
How to use PVIF (Present Value Interest Factor) calculator
The PVIF calculator is easy to use. All you need to do is to input the interest rate per periods and the number of periods.
Let us say that you invested $4000 into a promising Agricultural based start-up, and you will receive payment over 5 years with a 4% interest rate per period. You can calculate the current value of the returns on investment that you are going to get now.
Use the PVIF calculator here to get all the information you need.
Keynotes on PVIF (Present Value Interest Factor)
- Present value interest factors (PVIF) is used to calculate the time-value of a sum of money to be paid in the future.
- Present value interest factors (PVIF) are commonly used in analyzing annuities.
- Present value interest factors are also available in table form for you to reference (that is if you like).
Use the calculator to calculate your PVIF (Present Value Interest Factor) and give us your feedback.