Present Value Calculator
A sum you will receive in the future is worth less than the same sum today, because money can grow over time. Present value brings that future amount back to today by discounting a rate. Use it to compare cash vs. deferred payments.
Your numbers
Result
- Discountthe time value
- $3,194.17
- Future value
- $10,000.00
| Item | Value |
|---|---|
| Future value | $10,000.00 |
| Discount (time value) | $3,194.17 |
| Present value (today) | $6,805.83 |
How to calculate present value
The formula is PV = FV ÷ (1 + r)^n, where FV is the future value, r the discount rate per period and n the number of periods. Receiving $10,000 in 5 years, at an 8% discount rate, is worth about $6,806 today — the gap is the "cost of time". A higher rate or longer wait means a lower present value.
What it is for
Present value is how you compare offers across time: a cash discount vs. paying later, a bonus now vs. next year, a lump-sum settlement today vs. payments over time. It is also the heart of investment analysis (NPV) — bring every future cash flow back to today and add them up.
Which discount rate to use
Use a rate that reflects your opportunity cost — what the money would earn in a safe alternative (a savings account, a CD, Treasuries) or the cost of your debt. Higher rates penalize the future more. This is educational and assumes annual compounding.
Informational and educational result. Not a substitute for professional advice.
Frequently asked questions
Sources
- Time value of money — present value
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