Present Value Calculator
Discount future cash flows back to what they are worth today at a given rate.
Inputs
The amount you expect to receive in the future (set to 0 for annuity only).
Leave at 0 to discount a lump sum only.
Present Value
$25,417.46
PV of Lump Sum
$25,417.46
Contribution from the future value alone.
Discount Factor
0.508349
Total Discount Applied
$24,582.54
Periodic Discount Rate
7.000000%
Step by step
Annual discount rate
= 7.00%
Periodic rate
7% ÷ 1
= 7.000000%
Discount factor
(1 + 0.07)^−10
= 0.508349
PV of lump sum
$50,000.00 × 0.508349
= $25,417.46
Total present value
= $25,417.46
How it works
Present value answers the question: how much is a future amount worth right now? A dollar received in the future is worth less than one today because you could invest today's dollar and have more tomorrow. The discount rate represents the opportunity cost of not having the money now. When there are also periodic payments (an annuity), each payment is discounted separately and the results are summed.
Formulas
Present value of a lump sum
PV = FV ÷ (1 + r)^n
- FV
- Future value (lump sum)
- r
- Periodic discount rate
- n
- Number of periods
Present value of an annuity
PV_annuity = PMT × [1 − (1+r)^−n] / r
- PMT
- Periodic payment
- r
- Periodic discount rate
- n
- Number of periods
Frequently Asked Questions
What discount rate should I use?
The discount rate should reflect your opportunity cost — what you could earn on a comparable investment with similar risk. For risk-free government bonds, use the prevailing yield. For business cash flows, use the company's weighted average cost of capital (WACC). For personal decisions, your expected investment return is a reasonable proxy.
What is the difference between PV and NPV?
PV discounts one or more future cash inflows. NPV (Net Present Value) subtracts the initial outlay from that PV, giving the net economic value added. If NPV > 0, the investment creates value. Use the IRR Calculator for a full NPV/IRR analysis of irregular cash flows.
Why does a higher discount rate reduce present value?
A higher discount rate implies you have more attractive alternative uses for your money. Future cash flows look less appealing in comparison, so their present value falls. This is why rising interest rates reduce bond prices: bonds' fixed future coupons become worth less in today's terms.
Can I use this for annuity valuation?
Yes. Enter the periodic payment, set Future Value to 0, and input the number of payments and discount rate. The result is the fair price (present value) of that income stream.