Present Value Calculator
Find what a future sum of money is actually worth in today's dollars.
The return you could earn elsewhere.
Optional: a recurring yearly amount you'd also receive.
Present Value
in today's money
Present value answers a question that comes up constantly and gets answered badly: what is money in the future worth right now? A lottery advertising a $10 million prize paid over 30 years is not offering $10 million — it is offering a stream of payments whose value today is closer to $5 million, depending on the discount rate. A client offering to pay you in six months is offering less than the same figure today. This calculator applies the discounting math that turns future sums into a comparable present figure, which is the only way to honestly compare a payment now against a payment later.
How the calculator works
Enter the future amount you expect to receive, the discount rate, and the number of periods until you receive it. The calculator divides the future sum by the compounded discount factor and returns its present value. The discount rate is the important input and the one people get wrong: it represents what your money could otherwise earn, adjusted for the risk that the future payment does not arrive. A guaranteed government payment and a promise from a shaky startup deserve very different rates.
The formula
PV = FV ÷ (1 + r)^n
Where:
PV = present value
FV = future value
r = discount rate per period
n = number of periods
Example: $10,000 in 5 years at 7%
PV = 10,000 ÷ 1.07^5 = $7,130This is the future value formula turned inside out. Instead of growing money forward, you shrink it backward. The result says something precise: $7,130 invested today at 7% becomes $10,000 in five years, so the two are economically equivalent and you should be indifferent between them. If someone offers you $7,500 today instead of $10,000 in five years, take the cash — it beats the alternative by $370 in present terms.
What to know about present value
- 1The discount rate drives everything. At 5%, $100,000 in 20 years is worth $37,689 today. At 10%, it drops to $14,864 — less than half. Whenever someone presents a discounted valuation, the rate they chose is the assumption doing the real work, and it deserves more scrutiny than the output.
- 2Use your opportunity cost as the rate. If you can reliably earn 7% elsewhere, then 7% is the honest discount rate for a comparable-risk payment. For riskier future money, add a premium — that premium is what compensates you for the chance of never being paid at all.
- 3Lump sum versus annuity decisions are present value problems. When a pension offers $500,000 now or $3,000 monthly for life, discount the payment stream at a rate reflecting your alternatives and compare. Neither option is automatically better; it depends on the rate and your expected lifespan.
- 4Inflation and discounting are related but not identical. If you are working in nominal future dollars, use a nominal discount rate. If you are working in today's purchasing power, use a real rate. Mixing them — real cash flows with a nominal rate — is the most common error in amateur valuations and it understates value badly.
- 5For structured settlements and factoring offers, always run the present value yourself. Companies buying future payment streams profit from the gap between what they pay and the true present value, and that gap is only visible if you compute it.
Frequently asked questions
What discount rate should I use?
Start with what your money could safely earn elsewhere — a government bond yield is the conventional risk-free floor — then add a premium for the risk that the future payment does not materialize. For a guaranteed corporate payment, 5–8% is typical. For a promise from an unproven company, 15–25% may be honest. There is no objectively correct rate, which is exactly why you should run several and see how sensitive the answer is.
Why is money in the future worth less?
Three reasons stacked together. Money today can be invested and grow, so waiting costs you that growth. Inflation erodes purchasing power over the interval. And any future payment carries some probability of never arriving. Discounting bundles all three into a single rate. The first reason alone is enough — even with zero inflation and zero risk, $100 today beats $100 next year because you could have earned interest on it.
What is the difference between present value and net present value?
Present value discounts a single future amount or a stream of inflows. Net present value subtracts the upfront cost from that total. If a project's future cash flows have a present value of $120,000 and it costs $100,000 to start, the NPV is $20,000 — positive, so it creates value. NPV is the decision metric; PV is the ingredient it is built from.
How do I value a stream of payments rather than one lump sum?
Discount each payment separately by its own number of periods, then add the results. A payment three years out gets divided by (1+r)³, one five years out by (1+r)⁵. For a level stream over a fixed term there is an annuity shortcut, but the underlying logic is always the same: every payment is discounted by the time until it arrives, and later payments count for progressively less.
Should I take the lottery lump sum or the annuity?
Run the numbers rather than the instinct. The advertised jackpot is the undiscounted sum of decades of payments; the lump sum offer is roughly its present value, which is why it looks so much smaller. The lump sum wins if you can earn more than the implied discount rate and will not spend it recklessly. The annuity wins if you value the certainty and want protection from your own decisions — which, given how many lottery winners go bankrupt, is not a trivial consideration.