Present Value of Annuity Formula Calculator With Excel Template

Perhaps the seller thinks that they have an opportunity to reinvest the money and earn not 2% but instead 20%. In that case, the seller might be willing to sell the lease at a 10% or 12% discount to have the funds available to take advantage of the more profitable opportunity.

An annuity table, or present value table, is simply a tool to help you calculate the present value of your annuity. Real estate investors also use the Present Value of Annuity Calculator when buying and selling mortgages. This shows the investor whether the price he is paying is above or below expected value. That’s because $10,000 today is worth more than $10,000 received over the course of time. In other words, the purchasing power of your money decreases in the future. The calculator enables you to complete these calculations easily as it is online, free to use and time saving.

Common Situations Where the Present Value of Annuity is Calculated

An ordinary annuity generates payments at the end of the annuity period, while an annuity due is an annuity with the payment expected or paid at the start of the payment period. An annuity table uses the discount rate and number of period for payment to give you an appropriate factor. Calculate the present value interest factor of an annuity and create a table of PVIFA values.

This variance in when the payments are made results in different present and future value calculations. Remember that all annuity tables contain the same PVIFA factor for a given number of periods at a given rate, just like all times tables contain the same product for any two given numbers. Any variations you find among present value tables for ordinary annuities are due to rounding. Use this calculator to figure out what a future income stream is worth in today’s dollars – whether it is from an annuity, business, real estate, or other assets. The term annuity is used for a series of fixed payments paid to you or required to be collected from you. This is done for a fixed time period, excluding retirement plans where annuities are paid for a lifetime after retirement.

When Is The Present Value Of Annuity Calculator Used?

If you are considering receiving a single amount in lieu of a cash flow stream, the “Exact/Simple” compounding present value of annuity table option is the most conservative setting. That is, it will result in the highest present value calculation.