Present Value Calculator – Help Guide
The Present Value (PV) Calculator determines what a future sum of money is worth in today's dollars, using a discount rate. This concept (the time value of money) is fundamental to investing: money today is worth more than the same amount in the future because it can be invested and grow.
How to Use This Tool
- 1
Enter the future value
Enter the amount you expect to receive or pay in the future.
- 2
Enter the discount rate
Enter the rate of return you could earn on an equivalent investment (e.g., 6% for a balanced portfolio).
- 3
Enter the number of periods
Enter how many years (or periods) until you receive the future amount.
- 4
Review the present value
The calculator shows how much the future amount is worth in today's dollars.
Helpful Tips
- •The discount rate should reflect the opportunity cost. What you could earn on an alternative investment of similar risk.
- •Higher discount rates reduce present value significantly. This is why long-term cash flows are discounted heavily.
- •Use PV calculations to compare lump sum vs. annuity payment options.
- •Pension buyout decisions often benefit from a PV analysis to compare taking a lump sum vs. monthly payments.
Frequently Asked Questions
Ready to get started?
Open the Calculator