Calculate present value of future cash flows, investments, and annuities with discount rates for investment valuation and financial decision-making.
A present value calculator determines how much future money is worth today by discounting for time and opportunity cost of capital. PV = FV / (1 + r)^n where FV is future value, r is discount rate, n is years. Fundamental concept in finance: $1,000 today worth more than $1,000 in 5 years because today's money can be invested to grow. Used to evaluate investment opportunities, compare payment options (lump sum versus annuity), value bonds and loans, analyze business projects, and make financial decisions. Essential for investors, financial analysts, business valuators, and anyone comparing money across different time periods.
Make smart financial decisions by comparing apples-to-apples: lottery payout choice of $10M today versus $20M over 20 years requires present value analysis to determine which is actually larger (usually lump sum wins when invested properly). Evaluate structured settlements, pension buyouts, and annuity versus lump-sum offers fairly—insurance company offering $100k lump sum versus $500/month for 30 years looks like $180k total, but present value of payments at 5% discount rate is only $93k, making lump sum better deal. Value businesses and investment opportunities by discounting projected future cash flows to today's dollars for accurate valuation. Understand opportunity cost: money today can be invested at 7-10% annually, so future payments must be discounted by this return rate. Financial advisors use this daily to help clients make retirement payout decisions.
Enter future value (amount you'll receive in future), number of years until receipt, and discount rate (expected investment return—use 5-7% for conservative, 8-10% for moderate stock market returns, 3-4% for bond-like safety). Calculator shows present value (what future amount is worth today). Example: $50,000 in 10 years at 7% discount rate = $25,419 present value, meaning you should be indifferent between receiving $25,419 today or $50k in 10 years. For annuities (regular payments), use specialized PV of annuity calculator. Higher discount rates decrease present values more: $100k in 20 years worth $31k at 6% discount but only $14k at 10% discount. Use for comparing job offers with different bonus timing, evaluating lawsuit settlements, retirement planning decisions.
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Common questions about present value calculator — pv & discount rate calculator