Present Value Calculator
Calculate the present value of a future cash amount by discounting it back to today at an annual discount rate, with the total amount discounted away.
How It's Calculated
Formula
PV = \dfrac{FV}{\left(1 + \dfrac{r}{100}\right)^{t}}Present value (PV) is what a future sum of money is worth today, once you account for the fact that money available now can be invested and grow. A dollar you receive ten years from now is worth less than a dollar in your hand today, so discounting converts that future amount into its equivalent value right now, using a discount rate as the conversion factor. This calculator applies the discount rate once per year — each period you enter is exactly one year, with no monthly or quarterly subdivision. Enter the future cash amount you expect, the annual discount rate, and the number of years until you receive it, and the calculator returns today's equivalent value (present value) along with the total amount that discounting removed from the original future value.
Worked Examples
$10,000 future value, 5% annual discount rate, 10 years
- Rate as a decimal: r/100 = 5/100 = 0.05
- Discount exponent: t = 10 (one period per year)
- PV = 10000 / (1 + 0.05)^10 ≈ $6,139.13
- Total discount = $10,000 − $6,139.13 = $3,860.87
$50,000 future value, 6% annual discount rate, 20 years
- Rate as a decimal: r/100 = 6/100 = 0.06
- Discount exponent: t = 20 (one period per year)
- PV = 50000 / (1 + 0.06)^20 ≈ $15,590.24
- Total discount = $50,000 − $15,590.24 = $34,409.76
Frequently Asked Questions
What is a discount rate?
The discount rate is the annual rate of return you could reasonably earn elsewhere — an opportunity cost. It's the same kind of rate used to grow money forward under compound interest, but here it runs in reverse: instead of asking what a sum today grows into, present value asks what a future sum is worth today given that rate.
How is this the inverse of the Future Value Calculator?
Future value and present value solve the same compounding relationship for different unknowns. Future Value takes an amount today and projects what it grows to. Present Value takes an amount in the future and discounts it back to today. Using the same rate and number of years, discounting a future value and then growing the result forward again recovers the original number exactly.
What does a higher discount rate do to present value?
A higher discount rate lowers the present value of a given future amount. The higher the rate, the more a dollar today is assumed to be able to grow, so a fixed future amount is worth comparatively less right now. Present value moves in the opposite direction from the discount rate.
Why does this calculator only compound once a year?
The discount rate here is applied once per year by design — one period always equals one year, matching this calculator's formula (PV = FV / (1 + r)^t). It does not offer monthly or quarterly discounting, so there's no compounding-schedule selector to configure.
Does this account for recurring deposits or contributions?
No. This calculator discounts a single future lump sum back to today — it does not model a series of recurring contributions along the way. If you want to project growth of a lump sum plus regular deposits, use the Compound Interest Calculator instead.