My understanding is that you use present value table if cash flows are different and ordinary annuity when cash flows are the same across all years.  hope this helps.

An annuity is simply a stream of equal cash flows. You get (or pay) the same dollar amount for each period, whether it's monthly, quarterly, or annually. An easy example of an annuity would be your monthly mortgage payment. It doesn't change.

You could take the present value of each cash flow separately and sum them, but it's easier to just use the annuity formula (or table) when the cash flows don't change.

An ordinary annuity simply means that you receive (or pay) a stream of equal cash flows, starting at the END of the first period. So, if it's an annual period you won't receive (or pay) the first payment until the END of the year.

An annuity due simple means that you receive (or pay) a stream of equal cash flows, starting at the BEGINNING of the first period... meaning TODAY. So, you're essentially shifting all of the cash flows up one period so you receive every cash flow one period sooner. Because of this, an annuity due will always have a higher present value than an ordinary annuity, all else constant.

I hope this helps.

Aaron,

Thanks -your explanation clears some of my confusion, but I am still not fully getting it.

Lets say payment is made or received at the BEGINNING of a period,- (An annuity Due) do I add an extra period when choosing the n period from the tables?For example if I am paying you $200 on January1st of every year starting year 2010 when does period 5 occur- In comparison to an ordinary annuity? I am still a little confused. Thanks for your help.