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How to calculate Present value

The Present value formula, with plain worked examples you can check yourself.

Present value = FV ÷ (1 + r)ⁿ

Worked examples

FV = 4320 · r = 20% · n = 2Present value = 3,000
FV = 4320 · r = 20% · n = 2Present value = 3,000
FV = 3630 · r = 10% · n = 2Present value = 3,000

How to use it

  1. Write down the values for each letter in the formula.
  2. Do the brackets first, then divide or multiply.
  3. Check the units before you compare results.
  4. Compare the answer with last period or with a competitor to see if it is good or bad.

This formula belongs to Valuation & Deals.

Related terms

Due diligenceMergerAcquisitionGoodwill

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