Present Value Calculator
Calculate present value (PV) of future cash flows discounted back to present value.
Present Value Result
What a future payment is worth today
Present value runs compounding backwards. If money can earn 5%, then $1,000 arriving in a year is worth about $952 today, because $952 invested now becomes $1,000 by then. Discounting is how you make sums arriving at different times comparable — without it you cannot honestly compare a payout now against a larger one later.
The discount rate does nearly all the work, and choosing it is a judgement rather than a calculation. It should reflect what the money could otherwise earn at similar risk: a safe government rate for a certain payment, something considerably higher for an uncertain one. Small changes matter enormously over long horizons — discounting a payment 20 years out at 5% versus 8% roughly halves its present value.
This is the machinery behind most financial decisions that involve timing. It is how a lottery lump sum is compared with an annuity, how a pension transfer value is assessed, and how businesses appraise projects via net present value — the sum of discounted inflows minus outflows, where a positive figure means the project beats the discount rate. Any comparison of cash flows at different dates is meaningless until they are discounted to the same date.
Frequently asked questions
What is the Present Value (PV) formula?
PV = FV / (1 + r)^n, where FV is Future Value, r is discount rate, and n is time in years.
What is present value?
What a future sum is worth today, discounted at a chosen rate: PV = FV / (1+r)^n. It exists because money available now can be invested, so a dollar in ten years is worth less than a dollar today. It is the foundation of essentially all valuation.
How do I choose a discount rate?
It should reflect the opportunity cost and the risk of the cash flows. Corporate analysis commonly uses the weighted average cost of capital; personal decisions might use an expected portfolio return. The choice dominates the answer, so it is worth testing a range rather than defending a single number.
What is net present value?
The sum of all discounted future cash inflows minus the initial investment. A positive NPV means the project earns more than the discount rate and adds value; negative means it does not. Unlike IRR, NPV is expressed in currency and correctly accounts for the scale of a project.