Hello. I am struggling with calculating the net present value of payments with a 12% discount rate. The first 3 years (total of 36 payments) the payment is $950, and the subsequent 3 years (total of 36 payments) the payment is $450. The payments are made at the beginning of the year. I know from the book I am using the answer for this is $38,453 (they have it broken out that the first 36 payments NPV is $28,888 and the second 36 payments are $9,565). However, I am struggling how to do this within excel.
First, I determined I should use the PV function, as I needed to show there are payments at the beginning of the term vs. the end. Using the formula:
=PV(12%/12,36,950,1) I got an answer of $28,602.83, which is pretty close to the $28,888. However, I can't use this formula for the next 3 payments, as they are actually the 4th, 5th, and 6th payments.
I also tried doing a 'blended' rate of $700 (average of the 950 and 450 pmts over 6 years), =PV(12%/12,72,700,1) ,and came up with $35,805.76, but this is too far away from the $38,453, so I can't use this as a long-term solution.
Can anyone help? I've been searching the internet exhaustively and can't find a solution!
Thanks!
Ursula
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