Present Value Calculator
Calculate the present value of future cash flows. Determine how much a lump sum or series of payments is worth today using the time value of money principles.
Present Value Analysis
Present Value
$61,391
Total Discount
$38,609
38.6% discount
Calculation Type
Calculate the present value of a single future amount.
Future Value
Discount Parameters
Present vs Future Value Over Time
Discount Factor Over Time
Shows how much $1 in the future is worth today at 5% discount rate
Present Value Formulas
Lump Sum
PV = FV / (1 + r)^n
Where FV = Future Value, r = rate, n = periods
Ordinary Annuity
PV = PMT × [(1-(1+r)^-n)/r]
PMT = Payment amount per period
Growing Annuity
PV = PMT × [(1-((1+g)/(1+r))^n)/(r-g)]
g = growth rate per period
Year-by-Year Breakdown
| Year | Future Value | Present Value | Discount Factor |
|---|---|---|---|
| 1 | $100,000 | $95,238 | 95.24% |
| 2 | $100,000 | $90,703 | 90.70% |
| 3 | $100,000 | $86,384 | 86.38% |
| 4 | $100,000 | $82,270 | 82.27% |
| 5 | $100,000 | $78,353 | 78.35% |
| 6 | $100,000 | $74,622 | 74.62% |
| 7 | $100,000 | $71,068 | 71.07% |
| 8 | $100,000 | $67,684 | 67.68% |
| 9 | $100,000 | $64,461 | 64.46% |
| 10 | $100,000 | $61,391 | 61.39% |
Quick Answer
Present value (PV) is what future money is worth today, accounting for the time value of money. The formula is PV = FV / (1 + r)^n, where FV is future value, r is discount rate, and n is periods. $10,000 in 10 years at 7% discount rate has a present value of $5,083.49. Calculate at practicalwebtools.com.
Key Facts
- Present value formula: PV = FV / (1 + r)^n
- A dollar today is worth more than a dollar tomorrow (time value of money)
- Higher discount rate = lower present value
- Longer time period = lower present value
- PV is the foundation of discounted cash flow (DCF) analysis
- Used to compare investments and evaluate business decisions
- Discount rate often reflects opportunity cost or risk
Frequently Asked Questions
Present value (PV) is the current worth of a future sum of money or stream of cash flows given a specified rate of return. It answers: "How much is $X in Y years worth today?" This concept is fundamental to finance, helping compare money across different time periods.
The discount rate is the interest rate used to determine present value. It represents the opportunity cost of money - what you could earn if you invested the money elsewhere. Higher discount rates result in lower present values because future money becomes less valuable.
An ordinary annuity pays at the end of each period (most common - like mortgage payments). An annuity due pays at the beginning of each period (like rent). Annuity due has a higher present value because payments are received sooner.
Money has time value because: 1) It can be invested to earn returns, 2) Inflation reduces purchasing power over time, 3) There's risk that future payments may not be received, 4) People generally prefer money now over later. A dollar today is worth more than a dollar tomorrow.
Present value is used to: 1) Compare investment opportunities, 2) Value bonds and stocks, 3) Evaluate business projects (NPV analysis), 4) Determine fair prices for annuities and pensions, 5) Calculate loan amounts based on payment schedules.
A growing annuity is a series of payments that increase at a constant rate over time. It's useful for modeling salary growth, increasing dividends, or inflation-adjusted income streams. The present value formula accounts for both the discount rate and growth rate.
Present Value Analysis
Present Value
$61,391
Total Discount
$38,609
38.6% discount