How to calculate present value (PV)? Help!

[jacobjacob]

Here's my question, if you are able to help, I'm trying to show this in excel, but I don't know a lot about calculating PV, so if you have a financial/investing background and can answer, this would be great. I'm new to this, so I will need specefic details.

You distribute 250,000 order forms each month for a product/service, and each account that you acquire is worth $170 annually with an expected lifetime of 7 years per account. What is the PV of the accounts you bring in month 1 assuming a 2, 5, and 10% response rate (assume a 10% discount rate).

 

[rrdonutz]

Good call Chitosunday! Your formula is for an ordinary annuity (Payment type = 0, which means payment is received at the end of the period, which in this 'clarified' case means the end of the month). Below is how it looks in worksheet form, with a formula for an Annuity Due as well (payment type = 1, meaning payment is received at the beginning of the period).

-Tom

MrExcel80903.xls
	A	B	C	D
1		Case1
2	Ordersdistributed	250,000
3	Responserate	2.0%
4	Acctsgenerated	5,000
5	Revperacctpermo	$14.17
6	TotalRevpermo	70,833
7	Presentvalue(1)	$4,302,320
8	Presentvalue(0)	4,266,764
9	Rev.gen'd(7yrs)	5,950,000
10
11	DiscountRate	0.833%
12	Numberofperiods	84
13	(1)Annuitydue	1
14	(0)Ordinaryannuity	0
AnnuityMonthly