Present Value Calculator
Calculate the present value of a future sum of money and the interest foregone.
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How the Present Value Calculator Works
Our present value calculator tells you what a future sum of money is worth today, given a discount rate and a time horizon. It also shows the interest foregone — the difference between the future value and the present value — which represents the earnings you'd give up by waiting to receive the money rather than having it today.
Present Value Formula
PV = FV / (1 + r)n
Where:
- PV = Present value
- FV = Future value
- r = Discount rate per period (annual rate ÷ 1, for yearly compounding)
- n = Number of periods (years)
For example, $50,000 to be received in 10 years at a 5% discount rate has a present value of $50,000 ÷ (1.05)10 = $30,695.66. The interest foregone is $50,000 − $30,695.66 = $19,304.34 — that's the amount of growth you'd forgo by not having the $30,695.66 today to invest at 5%.
The Time Value of Money
Present value is built on the time value of money: a dollar today is worth more than a dollar tomorrow because of its earning potential. If you can earn 5% per year, then $1 today becomes $1.05 in a year, so $1 a year from now is worth only about $0.952 today. The further out the future cash flow and the higher the discount rate, the smaller its present value. This is why long-dated cash flows are worth much less than near-term ones, and why the discount rate you choose has such a large effect on valuation.
Choosing a Discount Rate
The discount rate should reflect the return you could earn on a comparable investment — your opportunity cost of capital. For a risk-free cash flow, a Treasury yield is a common choice. For a riskier cash flow, you'd use a higher rate to compensate for the uncertainty. Higher discount rates produce lower present values, so the rate you pick has a big effect on the result. When in doubt, run the calculator at a few different rates to see how sensitive the present value is to your assumption.
What Is Interest Foregone?
Interest foregone is the difference between the future value and the present value. It represents the earnings you'd miss out on by receiving the money later rather than today. In the example above, having $30,695.66 today and investing it at 5% for 10 years would grow it to $50,000 — so the $19,304.34 of "interest foregone" is exactly the growth you give up by waiting. Thinking in terms of foregone interest makes the cost of delayed payment concrete.
Where Present Value Is Used
- Investment valuation: Discounting future cash flows to decide what an asset is worth today.
- Bond pricing: Calculating the price of a bond from its future coupon and principal payments.
- Project evaluation: Comparing the present value of a project's future cash inflows to its upfront cost.
- Settlement decisions: Weighing a lump-sum payment today against a stream of future payments.
- Retirement planning: Estimating how much a future income stream is worth in today's dollars.
Frequently Asked Questions
Present value is what a future sum of money is worth today, given a specific discount rate. It reflects the time value of money — a dollar today is worth more than a dollar in the future because of its earning potential.
The present value formula is PV = FV / (1 + r)^n, where PV is the present value, FV is the future value, r is the discount rate per period, and n is the number of periods.
The discount rate should reflect the return you could earn on a comparable investment or your opportunity cost of capital. For personal finance, a common choice is a risk-free rate (e.g., a Treasury yield) or your expected investment return. Higher rates produce lower present values.
Present value lets you compare cash flows that occur at different times on equal footing. It is the foundation of discounted cash flow valuation, used to value investments, projects, bonds, and any future stream of payments.