Present Value Calculator

How present value is calculated

Present value is found by dividing the future sum by a discount factor, which is one plus the rate raised to the number of years: present value = future sum / (1 + rate)^years.

The idea is that money today is worth more than the same amount later, because it could be invested to earn interest. The further out the sum or the higher the rate, the lower the present value.

What you enter and what you get

Enter the future amount, the discount rate and the time in years. The result gives the present value and the discount effect, that is, how much the value shrinks due to time and the rate.

For example, a sum received in ten years is, at a five percent rate, clearly worth less today than its face value.

Who it is for

The calculator helps when you compare options paid at different times, such as a lump sum versus instalments, an investment return or a pension benefit.

Reading the result

The discount rate you use affects the result strongly. Choose a rate that matches your expected return or opportunity cost so that the comparison is meaningful.