The present value interest factor PVIF is a formula used to estimate the current worth of a sum of money that is to be received at some future date. PVIFs are often presented in the form of a table with values for different time periods and interest rate combinations. The present value interest factor is based on the key financial concept of the time value of money. That is, a sum of money today is worth more than the same sum will be in the future, because money has the potential to grow in value over a given period of time.

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The present value interest factor PVIF is a formula used to estimate the current worth of a sum of money that is to be received at some future date. PVIFs are often presented in the form of a table with values for different time periods and interest rate combinations. The present value interest factor is based on the key financial concept of the time value of money. That is, a sum of money today is worth more than the same sum will be in the future, because money has the potential to grow in value over a given period of time.

Provided money can earn interest, any amount of money is worth more the sooner it is received. Present value impact factors are often used in analyzing annuities. The present value interest factor of an annuity PVIFA is useful when deciding whether to take a lump-sum payment now or accept an annuity payment in future periods. Using estimated rates of return, you can compare the value of the annuity payments to the lump sum.

The present value interest factor may only be calculated if the annuity payments are for a predetermined amount spanning a predetermined range of time. The present value of the future sum is then determined by subtracting the PVIF figure from the total future sum to be received. A PVIF can only be calculated for an annuity payment if the payment is for a predetermined amount and a predetermined period of time.

PVIF tables often provide a fractional number to multiply a specified future sum by using the formula above, which yields the PVIF for one dollar. Then the present value of any future dollar amount can be figured by multiplying any specified amount by the inverse of the PVIF number.

Financial Ratios. Investing Essentials. Tools for Fundamental Analysis. Investopedia uses cookies to provide you with a great user experience. By using Investopedia, you accept our. Your Money. Personal Finance. Your Practice. Popular Courses. Financial Analysis How to Value a Company. Key Takeaways Present value impact factors PVIFs are used to simplify a calculation of the time-value of a sum of money to be paid in the future.

Present value impact factors are commonly used in analyzing annuities. Present value interest factors are available in table form for reference. Compare Accounts. The offers that appear in this table are from partnerships from which Investopedia receives compensation. Future Value of an Annuity The future value of an annuity is the total value of a series of recurring payments at a specified date in the future.

Time Value of Money TVM Definition The time value of money is the idea that money you have now is worth more than the same amount in the future due to its potential earning capacity. Annuity Table Definition An annuity table is a tool for determining the present value of an annuity or other structured series of payments. Partner Links. Related Articles. Annuities Annuity Derivation Vs.

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## Present Value Interest Factor (PVIF)

The present value interest factor of annuity PVIFA is a factor used to calculate the present value of a series of annuity payments. In other words, it is a number that can be used to represent the present value of a series of payments. Since present value interest factor of annuity is a bit of a mouthful, it is often referred to as present value annuity factor or PVIFA for short. The initial payment earns interest at the periodic rate r over a number of payment periods n. PVIFA is also used in the formula to calculate the present value of an annuity. Once you have the PVIFA factor value, you can multiply it by the periodic payment amount to find the current present value of the annuity. This simplifies the decision-making process for investors and generally makes it easier for you to calculate the present value without having to perform complex calculations.

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## Present Value Interest Factor of an Annuity (PVIFA)

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