Present Value Calculator
Money in the future is worth less than money today. Discount a single future amount or a stream of equal payments back to today. Choose your discount rate, term, compounding frequency and whether payments fall at the start or end of each period, then read the present value with a full period by period schedule.
Formula
Worked example
A $10,000 lump sum in 10 years at a 6% annual rate: 10,000 ÷ 1.06^10 = 10,000 ÷ 1.7908 ≈ $5,584 today. A $500 yearly payment for the same 10 years adds 500 × (1 - 1.06^-10) ÷ 0.06 ≈ $3,680, so both together are worth about $9,264 today.
What present value means
Present value (PV) answers a simple question: how much is future money worth right now? Because money can be invested to earn a return, a dollar today is worth more than a dollar in the future, the time value of money. Present value reverses compounding: it discounts a known future amount, or a whole stream of future payments, back to today using a rate that reflects what you could otherwise earn or your cost of capital.
Lump sum versus an annuity
A single future payout is discounted with PV = FV ÷ (1 + i)ⁿ, where i is the rate per period and n is the number of periods. A series of equal payments (an annuity) is discounted with the annuity factor PMT × (1 - (1 + i)⁻ⁿ) ÷ i, which sums the discounted value of every payment in one step. This calculator does either, or both at once, and lets you choose whether payments fall at the end of each period (an ordinary annuity) or the start (an annuity due). Payments made at the start are worth slightly more because each is discounted one period less.
Compounding frequency and timing
The discount rate you enter is annual, but money rarely compounds just once a year. Set the frequency to annual, semi-annual, quarterly, monthly, weekly or daily and the calculator splits the annual rate into a periodic rate and counts the matching number of periods. More frequent compounding pulls the present value down a little for the same headline rate. The period by period schedule shows exactly how each future cash flow is discounted and how the cumulative present value builds up to the headline figure.
Why it matters
Present value is the backbone of financial decision making. It lets you compare cash flows that arrive at different times on equal footing: valuing bonds, pricing annuities and pensions, weighing a lump sum against instalments, or judging whether an investment's future payoff justifies its cost today. Whenever you must choose between money now and money later, present value makes the comparison fair.
How the present value of $10,000 in 10 years changes with the rate
| Discount rate | Present value of $10,000 | Total discount |
|---|---|---|
| 2% | $8,203 | $1,797 |
| 4% | $6,756 | $3,244 |
| 6% | $5,584 | $4,416 |
| 8% | $4,632 | $5,368 |
| 10% | $3,855 | $6,145 |
A single future payout discounted annually. A higher rate or longer horizon means a lower present value.
Frequently asked questions
What discount rate should I use?
Use the return you could realistically earn on a comparable investment, or your cost of borrowing. Common choices range from a few percent for low-risk options to higher rates for riskier ones. A higher rate lowers the present value because more forgone growth is discounted away.
What is the difference between an ordinary annuity and an annuity due?
An ordinary annuity pays at the end of each period; an annuity due pays at the start. Because every annuity-due payment is discounted one period less, its present value is higher by a factor of (1 + i). Rent and many subscriptions are annuities due, while most loan payments are ordinary annuities.
How does compounding frequency affect present value?
The calculator divides your annual rate by the number of periods per year and discounts over that many periods. For the same headline annual rate, more frequent compounding (monthly rather than annually) produces a slightly lower present value, because interest is effectively earned a little sooner.
How is present value different from future value?
They are inverses. Future value compounds a sum forward in time; present value discounts a future sum back to today. PV = FV ÷ (1 + i)ⁿ, while FV = PV × (1 + i)ⁿ.
Does this account for inflation?
Only if your discount rate includes it. To express the result in today's purchasing power, use a real (inflation-adjusted) discount rate rather than a nominal one.