TimeValue

Present Value Calculator

Discount a future payment back to today's dollars — the core idea behind valuing bonds, settlements, and investments.

Future value

Discount rate

Years

What that's worth today

$11,168

What you entered

Future value: $20,000Discount rate: 6%Years: 10

1
Apply the present value formula
PV = FV ÷ (1 + r)ⁿ = $20,000.00 ÷ (1 + 0.0600)^10= $11,167.90

Result

What that's worth today: $11,168

Receiving $20,000 in 10 years is worth $11,168 today, discounted at 6% — money later is worth less than money now.

What $10,000 received in the future is worth today

Each cell discounts a future $10,000 back to today's money at the annual rate in the column heading: PV = FV / (1 + r)^n. The rate is your opportunity cost - what the money could otherwise earn.

Received in	At 3%	At 5%	At 7%	At 10%
1 year	$9,709	$9,524	$9,346	$9,091
3 years	$9,151	$8,638	$8,163	$7,513
5 years	$8,626	$7,835	$7,130	$6,209
10 years	$7,441	$6,139	$5,083	$3,855
15 years	$6,419	$4,810	$3,624	$2,394
20 years	$5,537	$3,769	$2,584	$1,486
25 years	$4,776	$2,953	$1,842	$923
30 years	$4,120	$2,314	$1,314	$573

This is the mirror image of future value, and it is the arithmetic behind deciding between a lump sum now and a larger amount later. At a 7% discount rate, $10,000 promised in 20 years is worth about $2,584 today, so a lottery or settlement offering a smaller immediate payout is not automatically the worse deal. The discount rate does the heavy lifting and is a judgement, not a fact: use what you could realistically earn on the money, and raise it if the future payment carries any risk of not arriving. Nothing here accounts for inflation separately, so use a real rate if your future amount is in today's money.

Why money later is worth less

A dollar today can be invested and grow; a dollar promised in 10 years can't start growing until you receive it. The discount rate captures both that lost opportunity and inflation risk.

Picking a discount rate

Use a higher discount rate for riskier or less certain future payments, and a lower rate for safe, guaranteed ones — the rate should reflect what you could safely earn elsewhere.

Real-world applications of present value

Lottery winnings: a $1 million jackpot paid over 20 years is worth far less than $1 million today. Legal settlements: courts use PV to calculate lump-sum equivalents of future damages. Bond pricing: a bond's fair price is the PV of all its future coupon payments plus face value. Business valuation: DCF models are entirely built on present value calculations.

Frequently asked questions

What is the present value formula?

PV = FV ÷ (1 + r)ⁿ. FV = future value, r = annual discount rate as a decimal, n = years until payment. Example: $50,000 due in 10 years at a 6% discount rate → PV = 50,000 ÷ (1.06)¹⁰ = $27,920. That future $50,000 is worth about $28,000 today.

What discount rate should I use?

It depends on the risk and your alternatives. For guaranteed payments (government bonds), use the risk-free rate (~4-5%). For business projections, use your cost of capital or WACC (typically 8-12%). For personal decisions, use what you could realistically earn investing the money (7% for stock market, 4-5% for savings accounts).

Is a lump sum or annuity worth more?

Compare the lump sum offered against the present value of all annuity payments. If a lottery offers $500,000 now or $40,000/year for 20 years ($800,000 total), discount each $40,000 payment to today's value. At 6%, the annuity's PV is about $459,000 — the lump sum of $500,000 is actually better.