Present Value Calculator
Present value runs the time value of money backwards: instead of growing today's money forward, it tells you what a future payoff is worth right now. Every bond price, lease valuation and capital budgeting decision rests on this one operation.
Present value
$14,108.10
- Discount (fv - pv)
- $5,891.90
- Discount factor
- 1.4176
Values update as you type. This calculator covers the single scenario its formula assumes — see Common Mistakes for what it leaves out.
The formula this calculator uses
PV = FV / (1 + r)^n
- PV
- Present value — what the future amount is worth today
- FV
- Future value — the amount to be received later
- r
- Discount rate per period as a decimal
- n
- Number of periods until receipt
How to check the result by hand
- 1
Identify the future amount and when it arrives
Write down FV and the exact timing. If several amounts arrive at different times, they cannot share one calculation — each needs its own discounting, then you sum them.
- 2
Choose the discount rate per period
Pick the return available elsewhere at comparable risk, expressed to match your period length. An annual 7% becomes roughly 0.5833% monthly if you intend to compound monthly. State the source of the rate so the valuation can be audited later.
- 3
Count periods in the same unit as the rate
Five years with an annual rate is n = 5. With a monthly rate it is n = 60. Mixing an annual rate with a monthly period count silently inflates the discounting by an enormous factor.
- 4
Compute the discount factor
Evaluate (1 + r)^n. At 7% over five years that is 1.402552. This factor is the whole story: everything distant gets divided by more.
- 5
Divide and interpret the result
PV = FV / factor = $20,000 / 1.402552 = $14,259.72. Read it as the largest amount you should pay today for that future right, given your alternative. Compare it to the asking price to decide.
For worked examples, common mistakes and the limits of this formula, read the full How To Calculate Present Value page.