Find out what a future amount of money is worth in today's dollars after discounting it at your chosen rate.
Present value (PV) is the worth in today's dollars of money you'll receive in the future. Because a dollar today can be invested to become more than a dollar tomorrow, future money is always worth less than the same amount now. The formula is PV = FV ÷ (1 + r)n, where r is the discount rate and n is the number of periods.
The discount rate represents the return you could earn elsewhere, or your required rate of return, and it drives the entire result. A higher discount rate shrinks present value because your money could be working harder somewhere else. Choosing the right rate — often your investment return or cost of capital — is the most important judgment call in any PV calculation.
This tool discounts a one-time future amount and, optionally, a stream of equal annual payments (an annuity). Adding payments lets you value things like a settlement paid in installments, a pension, or a lease. Each future payment is discounted by how many years away it is, then summed.
Tip: Use present value to compare a lump-sum offer against a payment plan — discount the payments back to today and see which is actually worth more.
Future value grows today's money forward; present value pulls tomorrow's money back. Whenever you compare cash flows arriving at different times — a buyout now versus payments later — converting everything to present value puts them on equal footing.