Definition of Present Value Of An Annuity
Present value of an annuity is the present value of periodic cash flows calculated by multiplying the amount of annuity with the present value interest factor of the annuity. An annuity is a periodic amount with a similar amount of cash flows after similar time intervals. PVIFA is the discount factor for a number of periods at a given discount rate.
Assume a project that generates $5000 per year for 8 years. The interest rate is 9%. The present value interest factor of the annuity will be calculated using this formula:
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