Present Value Calculator
Calculate the present value of a future cash flow. Discount future sums back to today's dollars using discount rate, periods and compounding frequency.
Enter future value, discount rate, number of periods and compounding frequency to calculate the present value of a future cash flow, the total discount and discount factor.
Cash flow received in the future
Cost of capital or required return
Years until payment received
How often interest compounds
Formula
PV = FV / (1 + r/m)^(n*m) where PV = present value, FV = future value, r = discount rate, m = compounding periods per year, n = number of years
Present value discounts a future cash flow back to today's dollars. The discount factor reflects the time value of money — money received in the future is worth less than money received today because it cannot be invested or earning returns during the interim. The higher the discount rate or longer the time period, the lower the present value.
Worked Example
Future value $10,000 · Discount rate 8% · 5 years · Annual compounding:
Discount factor = (1 + 0.08)^5 = 1.4693
Present value = $10,000 / 1.4693 = $6,805.83
Total discount = $10,000 − $6,805.83 = $3,194.17
This means that $10,000 to be received in 5 years is equivalent to $6,805.83 in today's money at an 8% discount rate. If you could invest that $6,805.83 at 8% today, it would grow to exactly $10,000 in 5 years.
Frequently Asked Questions
Use this in your workflow
Use the Future Value Calculator to calculate how much a present investment will grow. For project evaluation, use the NPV Calculator to sum multiple cash flows. Browse all Free Business Calculators.
Worked example: contract valuation
A useful starting point before entering your own figures above.
| Input / Output | Value |
|---|---|
| Future payment amount | $50,000 |
| Discount rate (WACC) | 10% |
| Years until payment | 3 years |
| Compounding frequency | Annual |
| Present value | $37,565.74 |
| Total discount | $12,434.26 |
| Discount factor | 1.3310 |
Interpretation: a contract that pays you $50,000 in 3 years is worth $37,565.74 in today's dollars, assuming a 10% discount rate (your cost of capital). If you could sell that contract today, a rational buyer would not pay more than this amount.