Present value factor

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Present value factor

Factor used to calculate an estimate of the present value of an amount to be received in a future period. If the opportunity cost of funds is 10% over next year, the factor is [1/(1 + 0.10)].
Copyright © 2012, Campbell R. Harvey. All Rights Reserved.

Present Value Factor

An estimate of the present value of future cash flow for a project.
Farlex Financial Dictionary. © 2012 Farlex, Inc. All Rights Reserved
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The notice also "provides guidance regarding the appropriate present value factors to be used for purposes of determining the basis recovery fraction of each payment received during phased retirement and provides guidance regarding the time for determining the basis recovery fraction for these phased retirement payments."
The number of present value factors incorporated in the formula depends upon the number of years the taxpayer believes will be necessary to fully recover the carryover interest deductions.
But if the taxpayer expects that it will be three years before the interest expense carryover can be deducted, the right side of the above equations could be modified to solve for a present value factor that could be used to determine the required interest rate.
The pattern producing a test value closest to the target value is regarded as the most appropriate equivalent for computing present value factors.
This is accomplished by discounting each after-tax cash flow through the use of present value factors reflective of the age of the cash flow.
Consider present value factors. Here, the two relevant factors are the CPA's estimated increase in earnings rate forward to retirement age, and the implicit present value discount rate from the retirement age back to the age of divorce.
Apply the net present value factors to the total enhanced earnings to determine the estimated present value of the enhanced earnings associated with the CPA license.

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