Calculate the present value (PV) of a future sum or series of cash flows discounted at a given interest rate.
Calculate the present value of a future amount with our free calculator, useful for evaluating investments, loans, and financial decisions involving future cash flows.
Present Value = Future Value ÷ (1 + r)^t
Where r is the discount rate and t is the number of periods until the future value is received. This reflects the time value of money, a dollar today is worth more than a dollar in the future.
Due to the time value of money, money available today can be invested to earn returns, and inflation typically erodes purchasing power over time.
This depends on context, commonly your expected investment return, cost of capital, or a risk-free rate plus a risk premium, depending on what you're evaluating.
It's commonly used to evaluate whether a future payment (like a lottery winnings structured payout, or a business investment's future returns) is worth more or less than an equivalent amount offered today.
A higher discount rate decreases present value, since it implies money grows faster, so future amounts are discounted more heavily to their present-day equivalent.