How to Calculate PVIF in Excel

Updated April 19, 2025

Determining the present value of future money is important for effective financial planning. The present value interest factor (PVIF) simplifies this calculation by clearly showing the current worth of future payments or cash flows. In this guide, you’ll learn how to efficiently calculate PVIF using Excel, turning a basic financial concept into a useful, practical tool.

What is PVIF?

The present value interest factor (PVIF) calculates how much a future sum of money is worth today, adjusting for interest and the passage of time. For example, suppose you expect to receive $1,000 in two years, and the interest rate is 5%. PVIF helps you determine today’s value of that future $1,000, considering that money received later is generally worth less than money in your hand now. It’s an essential concept for analyzing investments, loans, or any financial situation involving future cash flows.

The formula for PVIF is simple:

\text{PVIF} = \frac{1}{(1 + r)^n}

Here, r represents the interest rate per period, and n stands for the number of periods. This formula shows clearly how interest reduces the future amount when converting it back into today’s dollars—known as the “time value of money.” Using Excel, you can easily calculate PVIF, making it a practical tool for everyday financial decisions.

How to calculate PVIF in Excel

Enter your data:
1. In cell A1, type Interest Rate; in A2, enter 0.05 (representing 5%).
2. In cell B1, type Periods; in B2, enter 2.
Calculate PVIF:
1. In cell C1, type PVIF; in C2, type =1/(1+A2)^B2.
2. Press Enter. Excel calculates the PVIF, approximately 0.9070.
Calculate the present value (optional):
If you have a specific future amount, calculate its present value by multiplying it by your PVIF. For example, to find the present value of $1,000:
1. In cell D1, type Present Value; in D2, type =C2*1000.
2. Press Enter. Excel returns approximately $907.03, the present value of $1,000 in two periods at 5% interest.