So now that we know how to calculate the future value from present value, that is shifting gears in
reverse and let's go back from future value to present value.
So we are using the same values, eighty thousand five twenty five and the same 10 percent in five years
time period.
And let's move to the next sheet where we have the present value working's to the same eighty thousand
five twenty five five years.
This amount is happening at year five and the discount rate is 10 percent and we are supposed to find
the present value.
Well, one definitely of that would be to working manually backwards.
And if I like to do that, how do we do it?
I would say at year five, I have this much.
Maybe you're giving that much money to me or I'm giving that much money to you at year five and you
want to calculate the present value.
So how do we do that?
The value and divide it by one plus R one plus rate of interest at this point, once I have 10 percent.
So I will make sure that I have this one hundred percent rather than one, and then close the bracket
and press enter.
And here we have the value added for I will just copy and paste just to make sure that I lock the cells
accordingly.
So we'll lock C5 and I will not copy and paste the cells to your.
Zero.
And you can see that at Heimann to the present value of that would be fifty thousand dollars.
Alternatively, you can use the situation here, which is basically equals future value.
That is eighty thousand.
And if I can just to that and divided by one plus r sorry not divide by multiply by one divided by one
plus R one plus R rate of interest is 10 percent.
So I will rather put point one here.
Just let me hardcoded for now just to save time, even though we should not hardcourt so and power should
have power of that.
Should be fun.
Sorry but that should be fine.
And here you have the present value from the future value.
Now we already know that kind of stuff.
Right.
We can do that in finance, but let us do that using Microsoft Excel.
So let me zoom out a little bit so that you can see the entire screen.
And here we have you can see that our present value formula says US equals present value rate.
Rate of interest is 10 percent in our case.
And then we have NPR.
That is basically the number of periods.
So I will take that as five and then we have BMT.
TMT is basically the payment.
But I told you that it has to be a continuous payment for multiple years.
Probably will ignore this one.
I will just press another comma, just add another comment to make sure that we are skipping this value.
And no, I will move to the future value and I will also add a negative sign here so you can skip the
negative sign.
But your answer will be negative in that case.
But I'm adding the minus sign here and I will ignore that for now.
That is not needed.
I will just close the record and enter and you can see that I have the same present value that we can
calculate otherwise as well.
So I really hope that you have found it very easy.