How to Use the PV Function in Excel (Present Value)

The PV Function

1. Set up the financing inputs

• Start with the key fields needed for the calculation:
  • Interest rate
  • Loan term
  • Monthly payment
• Label the result column as Present Value or Loan Amount
• In this example, the goal is to determine the maximum system price a customer can afford based on a target monthly payment

2. Use the PV function to calculate the affordable system amount

• Use the PV function to return the present value of the financing arrangement
• The function uses:
  • the interest rate
  • the number of periods
  • the payment amount
• Excel handles the financial math in the background, so you do not need to calculate the discounted cash flows manually

3. Convert the annual interest rate to a monthly rate

• Because the payment is monthly, divide the annual interest rate by 12
• This aligns the rate with the payment frequency
• If your model were annual instead of monthly, you would leave the rate as annual

4. Confirm the number of periods is in the correct unit

• Check whether the loan term is already expressed in months
• If it is already in months, use it as-is
• If the term were stored in years, you would convert it to months before using it in the PV function

5. Enter the payment as a cash outflow

• Use the monthly payment as a negative number
• This is important because Excel financial functions treat payments as cash flows
• Entering the payment as a negative value helps return the correct loan amount as a positive result

6. Leave the remaining PV assumptions at their defaults

• The example assumes:
  • future value equals zero
  • payments occur at the end of the period
• These default assumptions are appropriate for a standard loan scenario
• The video notes that the payment timing setting exists, but it is not the focus here

7. Fill the calculation down for multiple financing scenarios

• Once the PV function is set up correctly, copy it down the column
• This lets you compare different combinations of:
  • monthly payments
  • interest rates
  • loan terms
• The result is a quick affordability table showing what each customer can finance

8. Use the results to guide sales conversations

• Review the present value output to see what system price each customer can support
• This helps comfort advisors:
  • recommend the right system tier
  • upsell when the payment capacity allows it
  • downsell when the original option is out of range
• The output becomes a practical affordability tool during financing discussions

9. Apply the same PV function to personal finance scenarios

• The video also shows how the PV function can be used outside HVAC sales
• Use it to estimate how much money you would need to invest today to reach a future target value
• In that version of the setup:
  • the rate is annual
  • the term is annual
  • the future target amount is included
  • periodic payments can be omitted if you are modeling a lump sum

10. Adjust signs carefully when testing different financial setups

• As you switch between loan examples and savings examples, Excel may require negative values for different inputs depending on the cash flow direction
• The key idea is to stay consistent with inflows and outflows
• The video emphasizes that this can feel a little strange at first, but it becomes easier with practice

11. Extend the analysis with other financial functions

• After finding the affordable loan amount with PV, you can continue the analysis with related financial functions
• The video mentions that Excel’s financial functions can help you show:
  • total paid over the life of the loan
  • total interest paid
  • other financing details customers may want to see
• This makes the PV function a strong starting point for broader financing analysis

12. Use the PV function as a decision-making tool

• In practice, the PV function helps answer questions like:
  • “If the customer can afford a certain monthly payment, what system can they buy?”
  • “How much would someone need to invest today to hit a future value goal?”
• Once the inputs are structured correctly, the function becomes a fast and flexible way to evaluate financing options in Excel