Which Excel function is used to calculate the present value of a cash flow stream with evenly spaced cash flows?

Which Excel function is used to calculate the present value of a cash flow stream with evenly spaced cash flows?

• A. PV for evenly spaced cash flows
• B. XNPV for irregular cash flows
• C. NPV
• D. RATE

Answer: (A)

Calculating the present value of a stream of cash flows that are evenly spaced uses a function designed for annuities. The PV function in Excel takes the per-period rate, the total number of periods, and the fixed payment amount per period to return the value today of all future payments. It also allows optional inputs for a future value and for whether payments occur at the end or beginning of each period. This setup matches the scenario of evenly spaced, constant cash flows exactly. In contrast, XNPV is used when cash flows occur on actual dates (irregular spacing), NPV expects regular intervals but uses a list of cash flows rather than a single fixed pmt, and RATE only computes the per-period discount rate rather than the present value itself.

Calculating the present value of a stream of cash flows that are evenly spaced uses a function designed for annuities. The PV function in Excel takes the per-period rate, the total number of periods, and the fixed payment amount per period to return the value today of all future payments. It also allows optional inputs for a future value and for whether payments occur at the end or beginning of each period. This setup matches the scenario of evenly spaced, constant cash flows exactly. In contrast, XNPV is used when cash flows occur on actual dates (irregular spacing), NPV expects regular intervals but uses a list of cash flows rather than a single fixed pmt, and RATE only computes the per-period discount rate rather than the present value itself.