This present value calculator answers the most important question in finance — what is future money worth today? Discount a single future amount, or a stream of payments, at any rate.
The Time Value of Money
A dollar today is worth more than a dollar in ten years — it can be invested, it is certain, and inflation has not nibbled it. Present value (PV) makes that intuition exact: PV = FV ÷ (1 + r)ⁿ. It is the Compound Interest Calculator run in reverse, and it underpins every serious valuation — bonds, pensions, leases, lawsuits settlements, business acquisitions. This tool is part of our Finance Calculators collection.
Worked Examples (Verified)
- $10,000 in 10 years at 7%: PV = 10,000 ÷ 1.07¹⁰ = $5,083. Offered that choice today — $5,083 cash now or $10,000 in a decade — a 7% investor should be indifferent.
- $1,000 a year for 10 years at 7% (annuity mode): the payments total $10,000 but their PV is $7,024 — each later payment discounted more than the last. (That annuity engine has a dedicated home at the Annuity Calculator.)
- The lottery illusion: “$1 million” paid as $50,000/year for 20 years, discounted at 6%, is worth about $573,496 today — the lump-sum offers make sense once you can run this number.
Choosing the Discount Rate
- The rate is your opportunity cost — what the money could earn elsewhere at similar risk: a savings yield for safe promises, an expected portfolio return for risky ones.
- Higher rates punish distant money brutally: at 3%, $10,000 in 30 years is worth $4,120 today; at 10%, just $573.
- Businesses call their rate the cost of capital and use PV (as NPV) to accept or reject projects: positive NPV creates value, negative destroys it.
Related Tools
- Compound Interest Calculator — the forward direction
- Annuity Calculator — payment streams both ways
- Bond Calculator — PV applied to coupons and principal
Frequently Asked Questions
What is the present value formula?
PV = FV ÷ (1 + r)ⁿ for a single amount, where r is the per-period discount rate and n the number of periods.
What discount rate should I use?
Your opportunity cost for money of similar risk and timing — e.g., a Treasury yield for a guaranteed future payment, or your expected investment return for an uncertain one. The answer is sensitive to this choice; try a range.
What is NPV?
Net present value: the PV of all future cash flows minus the initial cost. Positive NPV investments are worth more than they cost — the core rule of capital budgeting.
Why is a payment stream worth less than a lump sum of the same total?
Because the later payments wait longer to arrive, and waiting is exactly what discounting charges for. $10,000 spread over a decade is worth less than $10,000 next year.
How does inflation relate to present value?
Discounting at a rate that includes expected inflation converts future nominal dollars into today’s purchasing power — try 3% to see pure inflation erosion over long horizons.
Is this present value calculator free?
Yes — free, instant, no sign-up.