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Use the Present Value of Cash Flows Calculator to calculate the present value of fixed or changing cash flows to allow insight into future profits based on current costs and known interest rates.

Interest Rate (discount rate per Period): % | ||

Compounding (times per Period): | ||

Cash Flows at (of each Period): | ||

Number of Lines: | ||

Line | Periods | Cash Flows |

1 | @ | |

2 | @ | |

3 | @ |

How would you like to know if the cash flow you are expecting to receive in the near future would be worth as much as it is today? Present value of cash flows is the method to calculate the current value of funds based on a future value.

This method is based on the time value of money. It means that the money you are expecting in a year's time could be of less value, had you received it today; because the money in hand today can be invested to earn interest.

The present value of cash flow uses a discounting formula to calculate the present value of future cash flows at a specified rate of return. This rate of return is discounted from the future cash flows. This means the higher the discount rate the lower the present value of future cash flows.

Go for an automatic tool to calculate PV of cash flows if you want to be sure that your calculations are quick and precise. A calculator will give you a detailed report about the present value of your future cash flows. These cash flows can be fixed or changing. Factors that are important to achieve an accurate result on a calculator are:

**Interest rate or discount rate (per period)**- While using iCalculators calculator, you have to enter the expected interest rate in this field. This should be a number that you are expecting to gain per period. Discounting is a very important factor in calculating the present value of any future cash flows so define it wisely.**Compounding (Times per period)**- The calculator uses the compounding factor for the interest earned, which means your interest earns interest; the compounding occurs needs to be entered here.**Cash flow (of each period)**- Here, you need to select the point of cash flow. 'Beginning' to be selected if you are expecting the cash flows at the beginning of every period. 'End' to be selected if the cash flows are expected at the end of every period.**Number of lines**- The value of expected recurring cash flows to be selected here. In case of a fixed lump sum amount this should be selected as 1.

According to the inputs based on the above criteria, the calculator will provide you with a table that will contain:

**Cash flow series (PV)**- Total present value after combining all the cash flows from each period.**Cash flow stream**- This will show you the present value of each period against the future cash flows.

The most important factor that has an impact on present value is interest or discount rate. To give an example, there can be two situations, first, you are expecting a cash flow of 1k per month after 1 year for 6 months, or you want to receive a lump sum of 5.5k now. The present value will depend on the expected rate of return.

Generally, people tend to go for the first option as the money invested right now can earn interest. If the interest rate is not high enough to match the total loss occurred right now, it would be a wise decision to opt for the first option.

Money not spent today can lose its value in the future when calculated by applying the rate of inflation. Purchasing a product today could be cheaper than buying the same product in the future as inflation may cause the prices to go higher thus decreasing the purchasing power of your money.

The method that is used for present value of future cash flows uses discounting that could be expected interest rate, inflation rate or the combination of both.

- Please note that there are no set guidelines to calculate the expected rate of return. This is purely on the discretion of an individual or a business to decide on the rate of return.
- The method assumes that there will be a rate of return that needs to be discounted to calculate the present values.
- In case of businesses, there can be different rate of returns for different projects that have different durations. It is quite possible that the present value of future cash flows becomes less certain if the rates of returns are not realistic.

To summarize, the present value of cash flows helps us with financial decision making. The calculator has been designed in a way to be useful for both individuals and corporations. It is easy to use and saves a lot of time by avoiding manual calculations. It not only helps you in evaluating the present value of cash flow, but also helps you predict potential outcomes of your investments.

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