This table shows how much $1, to be paid at the end of various periods in the future, is currently worth, with interest at different rates, compounded annually.

To use the table, find the vertical column under your interest rate (or cost of capital). Then find the horizontal row corresponding to the number of years it will take to receive the payment. The point at which the column and the row intersect is your present value of $1. You can multiply this value by the number of dollars you expect to receive, in order to find the present value of the amount you expect.

An example showing how to use this table to find the Net Present Value of a major purchase or project follows the table.

Traders, Inc. is considering the acquisition of a new machine. After all the factors are considered (including initial costs, tax savings from depreciation, revenue from additional sales, and taxes on additional revenues), Traders projects the following cash flows from the machine:

Year 1: ($10,000)

Year 2: $ 3,000

Year 3: $ 3,500

Year 4: $ 3,500

Year 5: $ 3,000

Assume that Traders' cost of capital is 9%, using the net present value table shows whether the new machine would at least cover its financial costs:

Year	Cash Flow	Table Factor	Present Value
1	($10,000) x	1.000000 =	($10,000.00)
2	$ 3,000 x	0.917431 =	$2,752.29
3	$ 3,500 x	0.841680 =	$2,945.88
4	$ 3,500 x	0.772183 =	$2,702.64
5	$ 3,000 x	0.708425 =	$2,125.28
			----------------
		NPV =	$ 526.09

Since the net present value of the cash flow is positive, the purchase of the new machine would be at least slightly profitable for Traders.

Present Value of a Series of $1 Payments to Be Paid in the Future

This table shows how much a series of $1 payments, to be paid at the end of each period for a specified number of periods into the future, is currently worth, with interest at different rates, compounded annually. In other words, the table shows what you should be willing to pay, today, in order to receive a certain series of payments of $1 each.

To use the table, find the vertical column under your interest rate (or cost of capital). Then find the horizontal row corresponding to the number of the last year you will receive the payment. The point at which the column and the row intersect is your present value of a series of $1 payments. You can multiply this value by the number of dollars you expect to receive in each payment, in order to find the present value of the series.

An example showing how to use this table to find the Internal Rate of Return of a major purchase or project follows the table.

Example: As an example of how the table can be used to compute the Internal Rate of Return of a major project, consider the following:

Sellars, Inc. is considering the purchase of a new computer system that will cost $7,500, but will allow it to save about $2,000 a year in desktop publishing expenses.

If you want to use the annuity tables to calculate the IRR of Sellars' project, you must first compute the number to look up in the tables. You can do this by dividing the expected net cash outflow (costs) for the project by the expected average annual net cash inflow (savings). In this case, the cost of the project (net cash outflow) is $7,500, and the average annual net cash inflow is $2,000.

$7,500 / $2,000 = 3.75

Then, look at the row corresponding to the number of years the project or equipment will be in use (in this case, five). Look across the rows until you find the number that is closest to the result you found (3.75). Then look at the top of the column in which the closest number was found, to see the interest rate that is Sellars' IRR (in this case, 10%).