What's the difference between PV and NPV?

PV calculates present value of regular, equal payments over time at a constant rate. NPV adds present values of irregular cash flows that occur at specific times. Use NPV when payment amounts or intervals vary.

Should I use negative or positive values for pmt?

Use negative for cash you pay out (expenses, loan payments, storage costs) and positive for cash you receive (dividends, supplier rebates). The sign of pmt determines the sign of the result—negative payments yield negative PV.

How do I choose the right discount rate?

The rate represents your cost of capital, inflation, or expected return. For inventory holding, use your weighted average cost of capital. For financing decisions, use the loan or credit rate. For future costs, use inflation expectations.

Can I use PV for supply chain scenarios beyond financing?

Yes. PV works for any series of regular amounts in the future: maintenance costs, subscription fees, lease payments, warehouse holding costs, or recurring supplier contracts. Convert annual costs to the matching period (monthly, quarterly) and adjust the rate accordingly.

PV function

Returns the present value of an investment based on a series of regular payments and a constant interest rate.

=PV(rate, nper, pmt, [fv], [type])

Generate a PV formula

Describe what you need. The generator will reach for PV where PV is the right tool, and tell you when it is not.

Arguments

How PV reads its arguments

Argument	Required	Description
rate	Required	The interest rate per period as a decimal (e.g., 0.01 for 1%). Must be greater than -1; represents discount rate, interest, or inflation.
nper	Required	The total number of payment periods. Must be a positive integer; fractional periods are allowed.
pmt	Required	The payment per period. Typically negative to represent cash outflows; positive represents inflows. Required.
fv	Optional	The future value to discount back to present (optional, defaults to 0). Include to account for a lump sum owed or received at the end.
type	Optional	When payments are due: 0 or omitted = end of period, 1 = beginning of period (optional). Beginning-of-period payments yield slightly higher present value.

Returns

A number representing the present value in today's currency.

Availability

Excel: All · Google Sheets: Supported

Worked examples

1. Calculate present value of monthly warehouse storage costs

SKU	Warehouse	On Hand	Reorder Point	Cost
SKU-A001	WEST	500	100	5
SKU-A002	EAST	250	75	8

=PV(0.01, 24, -250)

Result: -5,314.07

SKU-A001 with 500 units costs $250/month to store at $0.50 per unit. Over 24 months at 1% monthly discount rate, the present value of all storage costs is $5,314.07 in today's dollars. This shows what lump sum today would be equivalent to those future monthly payments.

2. Find PV of quarterly reorder payments

SKU	Warehouse	On Hand	Reorder Point	Cost
SKU-B501	CENTRAL	150	50	12
SKU-C150	WEST	1000	200	2

=PV(0.03, 8, -200)

Result: -1,403.95

SKU-B501 reorder costs are $200 every quarter for 2 years (8 quarters). At a 3% quarterly discount rate, the present value is $1,403.95. This tells managers that paying $1,404 today would be equivalent to making all eight future quarterly payments.

3. Evaluate cost of supplier inventory financing

SKU	Warehouse	On Hand	Reorder Point	Cost
SKU-D200	EAST	75	30	15
SKU-A001	WEST	500	100	5

=PV(0.0075, 12, -1000, 0, 0)

Result: -11,414.03

A supplier charges $1,000/month for 12 months of inventory delivery at 0.75% monthly financing. The present value of $11,414 means paying that amount today would be equivalent to the 12 monthly $1,000 payments. Use this to compare upfront payment vs. financing options.

Common errors

Which PV error are you seeing?

Error	Why it happens	How to fix it
#VALUE!	One or more arguments is text instead of a number. Example: =PV("1%", 12, -250) passes "1%" as text rather than the decimal 0.01.	Convert text to decimal: use 0.01 instead of "1%", or wrap the cell in VALUE() to convert it.
#NUM!	The rate argument equals -1 or is less than -1. This breaks the mathematical formula because (1 + rate)^nper becomes undefined when rate ≤ -1.	Ensure rate is always greater than -1. Example: change =PV(-1, 12, -250) to =PV(0.01, 12, -250).
#N/A	One of the referenced cells (rate, nper, pmt, fv, or type) contains #N/A or another error value. PV propagates errors from its arguments.	Check all input cells for errors. Use IFERROR or IFNA to handle upstream errors, or correct the source data before passing it to PV.

Tips and when to use something else

Use PV to determine the lump sum today that equals a series of future payments. Negative pmt (outflows) returns negative PV; positive pmt returns positive PV.
For annual rates, divide by the compounding frequency: 12 for monthly (0.12/12 = 0.01), 4 for quarterly, 2 for semiannual. Rate and nper must use the same time period.
Set type=1 if payments occur at the beginning of each period (annuity due) instead of end-of-period (ordinary annuity). Beginning-of-period payments have slightly higher present value.
Use PMT instead of PV when you know the present value and need to find the payment. Use NPV for irregular cash flows or NPER to solve for number of periods.

Related functions

PMTPMT calculates the constant periodic payment needed to repay a loan or investment over a fixed number of periods at a fixed interest rate.FVFV returns the future value of a series of regular cash flows at a constant interest rate, modeling compound growth over time.NPERNPER returns the number of payment periods needed to pay off a loan or reach an investment goal at a fixed interest rate.RATERATE calculates the interest rate per period for an investment or loan given regular periodic payments and present/future values.NPVNPV returns the net present value of a series of cash flows discounted to their present value today, helping you decide if an investment creates value.

Frequently asked questions

What's the difference between PV and NPV?: PV calculates present value of regular, equal payments over time at a constant rate. NPV adds present values of irregular cash flows that occur at specific times. Use NPV when payment amounts or intervals vary.
Should I use negative or positive values for pmt?: Use negative for cash you pay out (expenses, loan payments, storage costs) and positive for cash you receive (dividends, supplier rebates). The sign of pmt determines the sign of the result—negative payments yield negative PV.
How do I choose the right discount rate?: The rate represents your cost of capital, inflation, or expected return. For inventory holding, use your weighted average cost of capital. For financing decisions, use the loan or credit rate. For future costs, use inflation expectations.
Can I use PV for supply chain scenarios beyond financing?: Yes. PV works for any series of regular amounts in the future: maintenance costs, subscription fees, lease payments, warehouse holding costs, or recurring supplier contracts. Convert annual costs to the matching period (monthly, quarterly) and adjust the rate accordingly.

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Reviewed 2026-09-17