Present Value Calculator — What Future Money Is Worth Today
Calculate the present value of a future sum of money.
See what $10,000 in 5 years is worth today at any discount rate.
What Is Present Value?
Present Value answers a simple but powerful question: What is money you will receive in the future worth right now?
Here is why this matters. Imagine someone offers you a choice: $1,000 today, or $1,000 five years from now. You would obviously take the $1,000 today. But what about $1,000 today versus $1,300 in five years? Now it gets interesting. Present Value helps you make that comparison.
The core idea is called the Time Value of Money: a dollar today is worth more than a dollar tomorrow, because you can invest today’s dollar and earn a return.
Think of it like this: if you can earn 5% per year, then $1,000 today becomes $1,276 in five years. Working backwards, $1,276 received five years from now is worth exactly $1,000 today. That $1,000 is the present value of $1,276.
The Formula
PV = FV / (1 + r)^n
Where:
- PV = Present Value (what the future amount is worth today)
- FV = Future Value (the amount you will receive in the future)
- r = Discount rate per period (annual interest rate, expressed as a decimal)
- n = Number of periods (usually years)
The term (1 + r)^n is called the discount factor.
It represents how much a dollar grows over n periods at rate r.
Dividing by it “reverses” the growth to find today’s equivalent.
Worked Example
What is $10,000 received in 5 years worth today if the discount rate is 7%?
PV = $10,000 / (1 + 0.07)^5 PV = $10,000 / (1.07)^5 PV = $10,000 / 1.40255 PV = $7,129.86
This means you would need to invest $7,129.86 today at 7% annual return to have $10,000 in 5 years.
Present Value Reference Table
Here is what $10,000 received in the future is worth today at various rates and time periods:
| Years | 3% | 5% | 7% | 10% | 12% |
|---|---|---|---|---|---|
| 1 | $9,709 | $9,524 | $9,346 | $9,091 | $8,929 |
| 5 | $8,626 | $7,835 | $7,130 | $6,209 | $5,674 |
| 10 | $7,441 | $6,139 | $5,083 | $3,855 | $3,220 |
| 15 | $6,419 | $4,810 | $3,624 | $2,394 | $1,827 |
| 20 | $5,537 | $3,769 | $2,584 | $1,486 | $1,037 |
| 30 | $4,120 | $2,314 | $1,314 | $573 | $334 |
Notice how dramatically the present value drops with higher rates and longer time periods. At 10% over 30 years, $10,000 is worth only $573 today!
Common Applications
- Investment analysis: Is a future payout worth the price you pay today?
- Retirement planning: How much do you need to save now to have a certain amount later?
- Legal settlements: What is a future payment stream worth as a lump sum today?
- Business valuation: What are a company’s future cash flows worth today? (This is the foundation of DCF analysis)
- Real estate: Comparing a property’s future rental income to its purchase price today
Choosing the Right Discount Rate
The discount rate should reflect the opportunity cost — what you could earn elsewhere with similar risk:
| Situation | Typical Discount Rate |
|---|---|
| Risk-free (government bonds) | 3–5% |
| Low-risk investments | 5–7% |
| Stock market average | 8–10% |
| Higher-risk investments | 10–15% |
| Venture capital / startups | 20–40% |
A higher discount rate means future money is worth less today — it reflects higher risk or better alternative opportunities.
Present Value vs. Future Value
These are two sides of the same coin:
- Present Value: “What is future money worth today?” — PV = FV / (1+r)^n
- Future Value: “What is today’s money worth in the future?” — FV = PV × (1+r)^n
If you know one, you can always calculate the other.