This discount factor template helps you calculate the amount of discounted cash flows using explicit discount factors.
Here is what the discount factor template looks like:
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A discount factor is a decimal number multiplied by a cash flow value to discount it back to the present value. The discount factor increases over time (meaning the decimal value gets smaller) as the effect of compounding the discount rate builds over time.
The discount factor is an alternative to using the XNPV or XIRR functions in Excel. As opposed to using the XNPV function, manually calculating the discount factor allows you to identify the present value of each individual cash flow.
The discount factor formula is:
Discount Factor = 1 / (1 x (1 + Discount Rate) ^ Period Number)
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