Growth & Return
Present Value Calculator
Work out what a future amount is worth today.
Present Value Calculator
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How it works
Present value discounts a future amount back to today. It answers: how much would I need to invest now at 7% to end up with $10,000 in ten years?
This is the thinking behind discounted cash flow, bond pricing and any decision that compares money across time. A higher discount rate makes future money worth less today, because you give up more growth by waiting.
Formula
PV = FV / (1 + r)n
FV = future value, r = discount rate per period, n = periods.
Worked example
Example: a $10,000 payment arriving in 10 years, discounted at 7%. PV = 10000 / 1.07^10 = $5,083.49. You would need about $5,083 today to replicate that future payment.
WORKED EXAMPLE — DEFAULT INPUTS
What to know
Choosing the discount rate is the hardest part of present value. Use a risk-free rate for guaranteed payments, the yield on comparable bonds for fixed income, and the cost of capital for business projects. A small change in the rate moves the answer a lot over long horizons.
Present value thinking also explains why an inheritance arriving in ten years is worth less than the same amount today: the money could have grown in the meantime. The discount rate is simply the growth you give up by waiting, so it must reflect what that money could earn.
Lottery winners and structured settlements face this math directly: a lump sum today is worth more than the same nominal total paid over decades, because the lump can earn interest. Present value is the language that makes such choices comparable.
FAQ
What discount rate should I use?
Use the return you could earn elsewhere at similar risk. For risk-free comparisons, a Treasury yield works; for a business project, the cost of capital is more realistic.
Is present value the same as NPV?
Close. NPV sums the present values of a series of cash flows and subtracts the initial investment. Present value alone handles a single future amount.
Why is present value lower than the future value?
Because money today can earn interest. The discount reflects the growth you give up by receiving the money later.
Does inflation belong in the rate?
Use a nominal rate if the future amount is nominal, or a real rate if both are in today dollars. Keep the units consistent.