PV Function
The PV function calculates the present value factor that can be used to multiply by the expected cash flow to determine the present value.
Syntax
PV(number of periods, discount rate) * value
Where the discount rate is expressed as a percentage.
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Example 1
PV(5,8)
Returns the present value of $1 to be received five years from now at the discount rate of 8%.
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Example 2
A client did not record a likely asset retirement obligation of $500,000 where the useful life of the asset is 5 years and the credit-adjusted risk-free rate is 5%.The initial cost will be recognized as:
Long-Lived Asset (Asset Retirement Cost) $500,000
ARO Liability $500,000
The use of the PV function can be applied to calculate the related accretion expense and ARO liability that should be recorded at year end:
PV(5,5) * 500,000 = $108, 237
Accretion Expense $108,237
ARO Liability $108,237
