Present Value Interest Factor - PVIF

AAA

DEFINITION of 'Present Value Interest Factor - PVIF'

A factor that can be used to simplify the calculation for finding the present value of a series of values. PVIFs can be presented in the form of a table with PVIF values seperated by respective period and interest rate combinations.

Present Value Interest Factor (PVIF)



The 'r' represents the discount interest rate, and the 't' represents the number of periods.

INVESTOPEDIA EXPLAINS 'Present Value Interest Factor - PVIF'

Using the PVIF works best when you are attempting to discount one value in the future. For example, assume you are going to receive $5,000 in four years time, with the current discount interest rate being 8%. Using the standard present value formula the calculation would be $5,000 / (1+.08)4 .

This would result in a present value of approximately $3,675.15. By using a PVIF table, an individual can identify the factor for this calculation being 0.73503 (calculated: 1/(1.08^4)). They can then multiply the $5,000 by 0.73503, which results in $3675.15 as well. This is another way to come to the same answer as the standard present value formula, but becomes a useful technique when you are comparing or dealing with a large number of values.

RELATED TERMS
  1. Net Present Value - NPV

    The difference between the present value of cash inflows and ...
  2. Future Value Of An Annuity

    The value of a group of payments at a specified date in the future. ...
  3. Present Value Of An Annuity

    The current value of a set of cash flows in the future, given ...
  4. Present Value Interest Factor Of ...

    A factor which can be used to calculate the present value of ...
  5. Internal Rate Of Return - IRR

    The discount rate often used in capital budgeting that makes ...
  6. Interest Rate

    The amount charged, expressed as a percentage of principal, by ...
RELATED FAQS
  1. What are the disadvantages of using net present value as an investment criterion?

    While net present value (NPV) calculations are useful when you are valuing investment opportunities, the process is by no ... Read Full Answer >>
  2. What's the difference between net present value and internal rate of return? How ...

    Both of these measurements are primarily used in capital budgeting, the process by which companies determine whether a new ... Read Full Answer >>
  3. Which is a better measure for capital budgeting, IRR or NPV?

    In capital budgeting, there are a number of different approaches that can be used to evaluate any given project, and each ... Read Full Answer >>
  4. Why is the TTM (trailing twelve months) important in finance?

    Using trailing 12-month (TTM) figures is an effective way to analyze the most recent financial data in an annualized format. ... Read Full Answer >>
  5. Is there an easy way to do financial forecasting in Excel?

    There is no easy way to conduct financial forecasting. All forecasting involves the technically impossible act of predicting ... Read Full Answer >>
  6. What can cause an asset to trade below its market value?

    An asset may trade below its market value due to a lack of demand for the asset in the marketplace, a perception or belief ... Read Full Answer >>
Related Articles
  1. Fundamental Analysis

    Discounted Cash Flow Analysis

    Find out how analysts determine the fair value of a company with this step-by-step tutorial and learn how to evaluate an investment's attractiveness for yourself.
  2. Investing Basics

    Calculating The Present And Future Value Of Annuities

    At some point in your life, you may have had to make a series of fixed payments over a period of time - such as rent or car payments - or have received a series of payments over a period of time, ...
  3. Investing Basics

    Understanding The Time Value Of Money

    Find out why time really is money by learning to calculate present and future value.
  4. Fundamental Analysis

    Calculating the Herfindahl-Hirschman Index (HHI)

    The Herfindhal-Hirschman Index, (HHI) is a measure of market concentration and competition among market participants.
  5. Investing

    What More Volatility Means For Momentum Stocks

    One byproduct of the recent tick higher in bond yields: a meaningful rise in volatility for both stocks and bonds.
  6. Investing

    How To Implement A Smart Beta Investing Strategy

    Smart beta investing is the notion of re-writing investment rules to improve investment outcomes by targeting exposures to intuitive ideas or factors.
  7. Markets

    Small-Cap Biotech Stocks to Watch

    Home runs in the small cap biotechnology market are hard to come by. Here are some names to watch.
  8. Fundamental Analysis

    Calculating Book Value of Equity Per Share (BVPS)

    Book value of equity per share compares the total shareholder equity, as stated in the company’s balance sheet, to the total number of shares outstanding.
  9. Charts & Patterns

    Distinguish A Stock Price Correction With A Price Trend

    We explain how you can use trend lines to help avoid market corrections.
  10. Investing

    Market Crisis: Does Diversification Still Work?

    If you still aren’t sold on the benefits of international diversification, you may object that: Diversification didn’t work during the last market crisis.

You May Also Like

Hot Definitions
  1. Yield Curve

    A line that plots the interest rates, at a set point in time, of bonds having equal credit quality, but differing maturity ...
  2. Productivity

    An economic measure of output per unit of input. Inputs include labor and capital, while output is typically measured in ...
  3. Variance

    The spread between numbers in a data set, measuring Variance is calculated by taking the differences between each number ...
  4. Terminal Value - TV

    The value of a bond at maturity, or of an asset at a specified, future valuation date, taking into account factors such as ...
  5. Rule Of 70

    A way to estimate the number of years it takes for a certain variable to double. The rule of 70 states that in order to estimate ...
  6. Risk Premium

    The return in excess of the risk-free rate of return that an investment is expected to yield. An asset's risk premium is ...
Trading Center