Present Value Calculator
Find out how much a future sum of money is worth in today's dollars. Enter the future amount, discount rate, and time period to calculate the present value.
Present value is the mirror image of future value — instead of asking "what will today's money grow to?", it asks "what is tomorrow's money worth today?" The answer is always less than the future amount, because money you have today can be invested and earn returns, while money promised later cannot.
The mechanism is discounting: you take the future cash flow and divide by (1 + rate) raised to the number of periods. The "rate" — called the discount rate — represents the opportunity cost of waiting, the inflation rate eroding purchasing power, or your required return on capital. A higher discount rate makes future money worth less today; a lower rate makes it worth more.
Present value is one of the most useful concepts in personal finance. It tells you what a future inheritance or pension payment is really worth, what to bid on a bond paying a fixed coupon, what a lottery jackpot's "lump-sum option" should compare to the 30-year annuity, and how to compare investment opportunities with different payout timing. This calculator handles a single future cash flow; for a stream of irregular cash flows over time, use the NPV calculator.
Inputs
Results
Present Value
$50,835
Total Discount
$49,165
Discount %
49.2%
Present Value by Year
Today's Value vs Discount
Discount Factor by Year
| Year | Discount Factor | Present Value |
|---|---|---|
| 1 | 0.935 | $93,457.94 |
| 2 | 0.873 | $87,343.87 |
| 3 | 0.816 | $81,629.79 |
| 4 | 0.763 | $76,289.52 |
| 5 | 0.713 | $71,298.62 |
| 6 | 0.666 | $66,634.22 |
| 7 | 0.623 | $62,274.97 |
| 8 | 0.582 | $58,200.91 |
| 9 | 0.544 | $54,393.37 |
| 10 | 0.508 | $50,834.93 |
Formula
How to use this calculator
- Enter the future value — the amount you expect to receive (or pay) at a specific date in the future.
- Enter the discount rate. This is the rate of return you would otherwise earn on that money — or your required return on alternative investments. Common choices: 2–3% for the risk-free Treasury rate, 4–5% for high-yield savings, 7–10% for the equity opportunity cost.
- Enter the number of years until the cash flow occurs. Longer horizons mean steeper discounting.
- Read the result as the "today equivalent" of that future amount. If you would prefer to have the PV in cash now rather than the FV later, the answer should make sense to you intuitively.
- When evaluating a lottery lump sum vs. annuity, compare the present value of the annuity stream (computed at a realistic post-tax investment rate) to the lump-sum offer. Most lump-sum offers are lower than the headline annuity total but higher than its present value at typical investment rates.
- When evaluating an inheritance promise or structured settlement, use a discount rate matching what you could actually earn on the cash — and remember that risk-free real returns are often lower than people assume.
- For multiple future cash flows at different dates, use the NPV calculator instead; sum the PVs to get total project value.
Worked examples
Lottery winnings — lump sum vs. annuity
Headline jackpot: $100 million paid as a 30-year annuity (≈ $3.33M/year). Advertised lump sum: $60 million. Present value of the annuity at 5% discount rate: PV = 3,333,333 × [1 − (1.05)^(−30)] / 0.05 ≈ $51.2 million The lump sum of $60M is actually higher than the PV of the annuity at 5% — making the lump sum the better deal if you can earn 5% or more on the money. At 7% discount, the annuity PV drops to ~$41.4M, making lump sum even more attractive.
Inheritance — $250,000 in 15 years
Your grandparent's estate is structured to pay $250,000 to you when you turn 50 — 15 years from now. PV at 7% discount: 250,000 / (1.07)^15 ≈ $90,600 PV at 3% discount: 250,000 / (1.03)^15 ≈ $160,500 The "fair value" of this future promise depends entirely on your discount rate. Using your investment opportunity cost (7% in equities) shows that the $250,000 promise is roughly equivalent to $90,000 in hand today.
Bond pricing — discount to par
A 5-year corporate bond pays a single $10,000 maturity payment (zero-coupon bond). If market yield = 6%: PV = 10,000 / (1.06)^5 ≈ $7,473 (the bond trades at this price) If market yield rises to 8%: PV = 10,000 / (1.08)^5 ≈ $6,806 This is exactly how bonds are priced. When market yields rise, the present value of fixed future payments falls — which is why bond prices and yields move inversely.
When to use this calculator
Use this calculator whenever someone offers you money in the future and you want to know what it's worth today. The classic cases are lottery payouts, pension lump-sum buyout offers, structured settlements, college funding promises, and bond pricing.
It's also useful for the reverse: deciding what to pay now for a future stream of cash. A rental property that will sell for $500,000 in 10 years is worth less than $500,000 today; the discount tells you what to pay. An annuity that pays $30,000/year for 20 years has a calculable PV that should anchor your bid.
Pair it with the future-value calculator (the inverse operation) and the inflation calculator (if your discount rate should reflect inflation rather than investment return). For multi-period cash flow streams — typical for business investments — use the NPV calculator, which sums the PVs of each individual cash flow.
Be honest about the discount rate. The single biggest error in present-value math is using too low a discount rate — which artificially inflates the value of future money. If you can earn 7% in a diversified portfolio, future money should be discounted at 7%, not 2%.
Common mistakes to avoid
- Using too low a discount rate. A 1–2% discount rate makes future money look almost as valuable as today's money, which is rarely realistic. Use your actual investment opportunity cost.
- Confusing discount rate with inflation rate. Inflation erodes purchasing power; discount rate represents opportunity cost. Sometimes they're the same; usually they're different. Choose deliberately based on the question.
- Forgetting to account for risk. A guaranteed $100,000 in 10 years is worth more than a "promised" $100,000 in 10 years from a risky counterparty. Risk should bump up the discount rate.
- Comparing PVs computed with different rates. A "$50K present value" computed at 3% is not comparable to a "$50K present value" computed at 8%. Always state the discount rate alongside any PV figure.
- Treating the lottery annuity's "headline" total as comparable to the lump sum. The headline $100M paid over 30 years is not $100M today. Always discount before deciding.
- Ignoring taxes. Many future cash flows (pension, lottery, settlement) are taxable on receipt. Compare after-tax PV to after-tax lump sum, not gross to gross.
Frequently Asked Questions
Sources & further reading
- Time Value of Money — Investor Education — U.S. Securities and Exchange Commission
- Bond Pricing and Yield — fundamentals — U.S. Securities and Exchange Commission
- FINRA — Investing Concepts and Key Calculations — Financial Industry Regulatory Authority