PVIFA Calculator

PVIFA Calculator

PVIFA calculator is a tool that simplifies the calculation to find the present value of a series of annuities. This calculator usually requires at least two variables: the interest rate per period (r), and the number of periods (n).

What is PVIFA?

It is a financial concept used to calculate the present value of a series of future cash flows, known as an annuity. The PVIFA represents the value today of a stream of cash flows to be received over a specified period, taking into account the interest rate or discount rate.

 

The PVIFA is derived from the present value formula, which calculates the present value of a future cash flow by discounting it back to the present using a specific interest rate. The PVIFA simplifies this process by providing a factor that can be multiplied by the periodic cash flow to determine its present value.

The formula for PVIFA

PVIFA = (1 - (1 + r)^-n) / r

Where:

• r is the interest rate per period
• n is the number of periods

Examples

Example 1:

Evaluate the preset value interest factor (PVIFA) when r = 23% and n = 12.

Solution

Step 1:

r = 23%, n = 12, PVIFA =?

Step 2:

Formula:

PVIFA = (1 - (1+r)^-n) / r

Step 3:

First of all, we have to divide r by 100 to remove %:

r = 23% / 100%

r = 0.23

Step 4:

Now putting values in the above formula:

PVIFA = (1 - (1+0.23)^-12) / 0.23

PVIFA = (1 - (1.23)^-12) /0.23

PVIFA = (1 - (0.083394740712096)) / 0.23

PVIFA = 0.9166052592879 / 0.23

PVIFA = 3.9852402577735

Example 2:

Evaluate the preset value interest factor (PVIFA) when r = 34% and n = 6.

Solution

Step 1:

r = 34%, n = 6, PVIFA =?

Step 2:

Formula:

PVIFA = (1 - (1+r)^-n) / r

Step 3:

First of all, we have to divide r by 100 to remove %:

r = 34% / 100%

r = 0.34

Step 4:

Now putting values in the above formula:

PVIFA = (1 - (1+0.34)^-6) / 0.34

PVIFA = (1 - (1.34)^-6) / 0.34

PVIFA = (1 - (0.17273136690427)) / 0.34

PVIFA = 0.82726863309573 / 0.34

PVIFA = 2.4331430385169