How this calculator works
Present value (PV) answers a simple question: how much is a future payment worth right now? Because money can earn a return over time, a dollar received today is generally worth more than a dollar received in the future, and present value quantifies exactly how much more using a chosen discount rate.
This calculator handles a single lump-sum future amount. Enter the future value, the discount rate per period, and the number of periods, and it discounts the amount back to today's terms. The discount rate should reflect the return you could otherwise earn, or the rate that reflects the risk and timing of the payment.
The formula
PV = FV ÷ (1 + r)^nFV is the future value, r is the discount rate per period as a decimal, and n is the number of periods. This is the exact inverse of compounding a lump sum forward: PV × (1 + r)^n = FV.
Worked example: $10,000 in 10 years at a 5% discount rate
- Divide the future value by (1 + the rate) raised to the number of periods: 10,000 ÷ (1.05)^10.
- (1.05)^10 ≈ 1.62889, so the present value is 10,000 ÷ 1.62889 ≈ $6,139.13.
- Checking the round trip: $6,139.13 grown forward at 5% for 10 years is 6,139.13 × (1.05)^10 ≈ $10,000, the original future value.
Frequently asked questions
What discount rate should I use to discount a future lump sum?
Use a rate that reflects the return you could realistically earn elsewhere on money of similar risk, sometimes called the opportunity cost of capital. A higher discount rate produces a lower present value for the same future amount.
How is present value different from future value?
Present value discounts a future amount back to today; future value grows a present amount forward in time. They use the same formula rearranged, and one recovers the other exactly at the same rate and number of periods.
Does present value account for inflation?
Only indirectly, through whatever discount rate you choose. If you want to separate inflation from a real rate of return, use the inflation calculator's buying-power mode alongside this one.
Can present value handle multiple future payments?
This calculator handles a single lump sum. For a series of payments (an annuity), each payment's present value is calculated separately at the same rate and then summed.
Why is present value always lower than the future value?
Because the formula divides the future amount by (1 + r) raised to the number of periods, and whenever the discount rate is positive that divisor is greater than 1, so dividing by it always produces a smaller number than the original future amount. In the $10,000-in-10-years example at a 5% discount rate, that divisor works out to about 1.62889, which is why the present value comes out to roughly $6,139.13 rather than the full $10,000.