# Present Value Factor Calculation | Steps involved | Calculator

## Formula to calculate P.V.F

The following formula is used to find the present value factor.

P.V.F = $1/(1+r)^n$

Where,

P.V.F = Present Value Factor

r = Discount Rate

n = Number of years

The following example clears the calculation of present-value factor.

• Discount rate is 12%.
• Number of year is three.
• The present value factor is 0.712

0.712 means means that Rs.1000 receivable after 3 years is equal to Rs.712 today. In other words, Rs.712 invested today at 12% will bring Rs.1000 after three years.

9. Then, the present value of cash inflows for different values are calculated with the help of present value calculator at 12%.

10. The cash outflows at subsequent periods are discounted at the same rate of present value factor.

The present value of total cash inflows should be compared with the present value of total cash outflows. If the present value of cash inflows are greater than (or equal to) the present value of cash outflows (or initial investment), the project would be accepted. If not so, then the project will be rejected.