Excel’s financial functions, their interpretation, and correct formulation are presented in this section. A majority of these functions are routinely used in day-to-day project economics and financial modeling.
The PV, FV, and PMT Functions
For apple-to-apple comparison of cash-flows from various investments or projects it is important to convert each cash-flow into equivalent basis. The equivalence could be converting all cash-flows to present value (PV, time zero) or to sometime in the future (FV, future value) or distributed equivalently over each year (AV or AE, annual equivalent). The AV or AE in Excel are represented by PMT (periodic payment). The conversion of future cash-flows to PV is called discounting ...
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