Calculate the present value (PV) of a future sum of money — what an amount you'll receive later is worth in today's dollars, given a discount rate and compounding. Free, instant, fully validated.
PV = FV ÷ (1 + r)n
Present value answers a core finance question: how much is money you'll receive in the future worth today? Because a dollar today can be invested to earn a return, a dollar received years from now is worth less than a dollar in hand. The present value formula discounts that future amount back to today using a chosen rate: PV = FV ÷ (1 + r)n, where r is the periodic rate and n is the number of periods.
For example, $10,000 received in 10 years, discounted at 6% compounded monthly, is worth about $5,496 today. The "discount rate" represents your opportunity cost — the return you could earn elsewhere, or the rate of inflation eroding purchasing power. Present value is the foundation of bond pricing, loan analysis, retirement planning, and any decision that compares money across different points in time.
Money available now is worth more than the same amount later because it can earn a return. Present value quantifies exactly how much more.
A higher discount rate means future money is worth less today. Use your expected investment return, cost of capital, or inflation rate as the rate.
Present value and future value are inverses. Future value compounds money forward; present value discounts it back. This tool also shows the effective annual rate.
Bond valuation, lottery lump-sum vs annuity decisions, business investment (NPV), and comparing job offers or settlements paid over time.
Present value asks what a future sum is worth today, given that money available now can be invested. It is the engine underneath bond pricing, pension valuations, lease accounting and every discounted cash flow model. The discount rate carries all the judgement: it represents the return you could earn elsewhere at comparable risk, and small changes in it move the answer a great deal over long horizons. Discounting is simply compounding run backwards — where compounding multiplies by (1 + r)^n, discounting divides by it.
PV = FV ÷ (1 + r)^nDiscount factor = 1 ÷ (1 + r)^nwhere:
Assumptions: Assumes a single lump sum at a known date, a constant discount rate and no default risk. For a stream of payments, discount each one separately and add the results.
You are promised $50,000 a decade from now. Money of similar risk earns 6% a year, so that is the discount rate.
ResultPV = $27,920
This is why lottery "cash value" is far below the advertised jackpot, and why a pension paid decades out is cheaper to fund than its headline figure suggests. The longer the wait, the more the discount rate dominates.