A present value calculator determines how much a future amount of money is worth today, given a discount rate.
About this calculator
A present value calculator determines how much a future amount of money is worth today, given a discount rate. The principle is that money available today is worth more than the same amount in the future because today's money can be invested to earn returns.
Present value is used in finance to value investments, bonds, and business decisions by comparing future cash flows to what they'd be worth today.
Common uses
- Determine what a future pension payment is worth today
- Value a business by discounting future cash flows to present value
- Compare two investment options with different payment timelines
- Calculate how much to invest today to have a future target amount
Frequently asked questions
What is the present value formula?
PV = FV / (1 + r)^t, where FV is the future value, r is the annual discount rate (decimal), and t is the time in years. For example, ₹1 lakh expected in 5 years at a 10% discount rate has a present value of ₹1,00,000 / (1.10)^5 ≈ ₹62,092.
What discount rate should I use?
The discount rate should reflect the opportunity cost of money, the return you could earn on an alternative investment of similar risk. For personal finance, use the return on a similar-risk investment. For business decisions, use the Weighted Average Cost of Capital (WACC).