Present Value Calculator
A dollar later is worth less than a dollar now — present value says exactly how much less. Discount a single future amount, a stream of periodic payments, or both back to today’s dollars at any rate, with end-of-period or beginning-of-period timing.
What makes up the present value
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Compare optionsHow discounting works
Present value runs compound growth in reverse. If money can earn 6% a year, then $1 today becomes (1.06)10 = $1.79 in ten years — so a promise of $1.79 in ten years is only worth $1 now. Every future cash flow gets divided by (1 + r)n for however many periods away it sits. The bigger the rate or the longer the wait, the harder the haircut — which is why lottery lump sums are so much smaller than the advertised annuity totals.
How it’s calculated
PV of a lump sum = FV ÷ (1 + r)n. PV of a level payment stream = PMT × [1 − (1 + r)−n] ÷ r, multiplied by (1 + r) when payments land at the beginning of each period (annuity due). Total PV is the sum of both pieces; the “discount applied” line is (FV + total payments) − total PV — the value the waiting time costs.
Assumes a constant rate per period and level payments. Estimates for education — not valuation, tax, or investment advice.
Worked example
What is $100,000 arriving in 10 years worth today at 6%, plus $2,000 a year along the way? The lump sum: 100,000 ÷ (1.06)10 = $55,839.48. The payments: 2,000 × [1 − 1.06−10] ÷ 0.06 = $14,720.17. Together: $70,559.65 — today’s fair value of $120,000 of future money at that rate. Shift the payments to the beginning of each year and the stream rises to $15,603.38, lifting the total to $71,442.86.
Common mistakes
- Mismatching rate and period — an annual rate with monthly periods overstates the discount enormously.
- Discounting risky cash flows at a risk-free rate; uncertainty deserves a higher rate and a lower PV.
- Comparing a PV to a future price tag — both numbers must live at the same point in time.
- Forgetting inflation is separate: discounting at 6% nominal answers a different question than 3% real.
Where it is used
- Valuing a pension buyout, structured settlement, or lottery lump-sum versus annuity offer.
- Business valuation homework: discounting future cash flows to price an asset.
- Deciding how much a delayed payment is really worth in a negotiation.
Frequently asked questions
What does present value actually tell me?
The amount you would need today, growing at your discount rate, to exactly reproduce the future money. If $100,000 in 10 years has a PV of $55,839.48 at 6%, then $55,839.48 invested at 6% becomes $100,000 — so anything less than that price for the claim is a good deal at that rate.
What discount rate should I use?
Your opportunity cost. Common choices: a risk-free Treasury yield for safe cash flows, your expected portfolio return (5–8%) for personal decisions, or a company’s cost of capital for business valuation. Higher risk deserves a higher rate, which shrinks the PV.
How is a period defined here?
A period is whatever interval your rate matches — usually a year with an annual rate. For monthly analysis, use the monthly rate (annual ÷ 12) and count periods in months. Rate and periods just have to describe the same time step.
What changes with beginning-of-period payments (annuity due)?
Each payment arrives one period sooner, so every discount factor shrinks by one period — the annuity PV is multiplied by (1 + r). In the worked example, $2,000 a year for 10 years at 6% is worth $14,720.17 at end-of-period timing and $15,603.38 at beginning-of-period.
Is present value the same as NPV?
PV discounts money you will receive. Net present value subtracts what you pay today: NPV = PV of inflows − initial cost. Use this page to value the inflows, then compare against the price — or use our NPV calculator for multi-year project cash flows.