The present value interest factor of annuity (PVIFA) can be used to calculate the present value of a series of annuities by considering cash flows and depreciation.If you make a large purchase or take out a loan, you can use the present value factor for annuity to determine your future payments. The calculation looks like this: PVIFA = 1-(1+r)-N/r r is the period rate. N is payments or withdrawals. The calculation contains variable factors, including the quantity borrowed, the given interest rate, the number of regular intervals at which the loan is repaid and the term of the loan. Anne took out a loan for $2500, and will pay back $500 per year at a 5% rate. The annuity factor on her loan is 4.33. Multiplying her $500 payment by the 4.33 annuity factor gives a present value of $2,165.
