About the Present Value Calculator
This present value calculator tells you what money you will receive in the future is worth today. Enter a future lump sum, any regular payment you will receive (or pay) each period, the discount rate, the number of years and the periods per year. The result is the single amount today that is financially equivalent to those future cash flows.
Present value is how you compare a lottery lump sum with annual installments, value a pension or structured settlement, decide how much to invest now to hit a target, or price a bond. It is also a standard finance-course calculation and matches the PV function in Excel and financial calculators.
The discount rate should reflect what you could earn elsewhere with similar risk, or your required return. A higher rate or a longer wait shrinks present value. The calculator assumes a constant rate and equal payments at the same frequency as compounding.
With the default inputs, the present value is $61,391.33. Change any value above to recalculate instantly.
How to use the present value calculator
- 1Enter the future lump sum you expect to receive (or need).
- 2Add any regular payment received each period, or leave it at 0.
- 3Enter a discount rate — your expected return or required rate of return.
- 4Set the number of years, periods per year and payment timing.
- 5Read the present value and compare it with the offer or price you have today.
Formula and method
Present value reverses compounding. The periodic discount rate i is the annual rate divided by periods per year and N is the number of periods. Dividing the future lump sum by (1 + i)^N tells you how much would have to be invested today at rate i to grow into it.
The payment stream is valued with the present value of an annuity formula, which adds up every payment discounted back from the period it arrives. For an annuity due (T = 1) each payment arrives one period sooner, so its value is multiplied by (1 + i). With a zero rate, present value equals the undiscounted total.
- PV
- Present value today
- FV
- Future lump sum
- PMT
- Payment each period
- i
- Discount rate per period
- N
- Number of periods (years × periods per year)
- T
- 1 for payments at the beginning of each period, 0 for the end
Worked examples
$100,000 received in 10 years at 5%
$100,000 ÷ 1.05^10 = $61,391.33. In other words, investing about $61,391 today at 5% a year would grow to $100,000 in ten years, so that is what the future sum is worth now.
Monthly income: $1,500 for 20 years at 6%
Receiving $1,500 a month for 240 months totals $360,000, but discounted at 0.5% a month it is worth about $209,371 today. That is the lump sum which, invested at 6% and drawn down monthly, would fund exactly those payments (a real insurer’s price would also reflect mortality, fees and its own rates).
Lottery installments: $20,000/year for 25 years, paid at the start of each year, at 4%
Twenty-five annual payments of $20,000 starting now total $500,000. Discounted at 4% they are worth about $324,939 today — so a lump-sum offer above that would be the better deal at that rate.
Frequently asked questions
What is present value?+
Present value is today’s worth of money you will receive in the future, after discounting for the return you could have earned in the meantime. A dollar received later is worth less than a dollar today because today’s dollar can be invested.
What discount rate should I use?+
Use the return you could reasonably earn on an investment of similar risk: a Treasury yield for guaranteed payments, a bond yield for moderate risk, or a higher required return for risky cash flows. Businesses often use their cost of capital.
How do I calculate present value in Excel?+
Use =PV(rate, nper, pmt, fv, type). For $100,000 in 10 years at 5%: =PV(5%, 10, 0, 100000) returns −61,391.33, negative because it is the amount you would pay today.
What is the difference between PV and NPV?+
PV values future cash inflows. Net present value subtracts the upfront cost, and can handle uneven cash flows. If an investment’s NPV is positive, it earns more than the discount rate.
Why does a higher discount rate lower present value?+
A higher rate means today’s money could grow faster elsewhere, so you need less of it today to match the future amount. Present value falls as either the rate or the time until payment increases.
Results are estimates for educational purposes and are not financial advice. Rates, fees and terms vary — confirm with your lender or a licensed advisor before making decisions.