Present Value Calculator
Find what a future amount, or a series of payments, is worth in today's money, and see the discount factor behind the answer.
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A dollar in the future is worth less than a dollar today, because money you hold now can earn interest. Present value (PV) puts a number on that difference. It tells you what a future sum, or a stream of future payments, is worth in today’s money at a chosen rate. Use it to compare a lump sum with installments, value a bond or pension, or decide whether an investment is worth its price.
How to use the present value calculator
- Enter the future amount you will receive. Leave it at 0 if you only have regular payments.
- Optionally enter a regular payment received every period, such as an annuity or a pension.
- Enter the discount rate per year and the number of years.
- Choose how often interest compounds (and payments arrive), and whether payments come at the end or start of each period.
The results show the total present value, split into the future amount and the payments, plus the discount factor and the total discount.
The present value formula
For a single future amount:
PV = FV ÷ (1 + i)^nFor a level payment received every period (an ordinary annuity):
PV = PMT × (1 − (1 + i)^−n) ÷ iHere i is the rate per period and n is the number of periods. For payments at the start of each period (an annuity due), multiply the annuity result by (1 + i). The discount factor, 1 ÷ (1 + i)^n, is the value today of $1 received at the end.
Worked example
What is $10,000 received in 10 years worth today, at 5% a year?
- Discount factor = 1 ÷ 1.05¹⁰ = 0.613913.
- Present value = 10,000 × 0.613913 = $6,139.13.
- The total discount is $3,860.87: the interest you would earn by investing $6,139.13 today at 5% for 10 years.
With payments: $1,000 a year for 10 years at 5% is worth $7,721.73 today if paid at the end of each year, or $8,107.82 if paid at the start.
Where present value is used
- Lump sum vs. installments. A prize of $50,000 a year for 20 years, first payment now, is worth about $607,906 today at 6%. If the lump-sum option is more than that, take it.
- Pensions and structured settlements. Present value turns a monthly income into a single comparable number.
- Bonds. A bond’s price is the present value of its coupons plus its face value.
- Business decisions. Discounted cash flow and NPV both start with present value.
To solve for a rate, a number of periods or a payment instead, use the finance calculator. To see the opposite direction, money growing forward, use the compound interest calculator.
Common mistakes
- Using a rate that doesn’t match the risk. A risky future payment should be discounted at a higher rate than a guaranteed one.
- Mixing periods. Monthly payments need a monthly rate and the number of months.
- Forgetting inflation. If the future amount is in nominal dollars, use a nominal rate. If you want today’s purchasing power, the inflation calculator shows the effect separately.
- Treating present value as a prediction. It is a comparison tool. The answer is only as good as the discount rate you choose.
Frequently asked questions
What discount rate should I use?
Use the return you could earn elsewhere on money with similar risk. For a safe payment, that might be a savings or Treasury rate. For a business project, it is usually the company's cost of capital. A higher rate gives a lower present value.
What is the difference between present value and net present value?
Present value is what future cash is worth today. Net present value subtracts what you pay today, so it tells you whether an investment beats your discount rate. NPV = present value of the inflows − the upfront cost.
Does more frequent compounding change the present value?
Yes, slightly. $10,000 in 10 years at 5% is worth $6,139.13 today with yearly compounding, but $6,071.61 with monthly compounding, because the money would have grown faster.
When should payments be at the start of the period?
Use the start for payments made in advance, such as rent, insurance premiums and lottery annuities that pay the first installment straight away. Each payment is received one period earlier, so the present value is higher.