Present Value Calculator
At 8.00% a year, each dollar received after 5 years is worth $0.68 today.
How the present value calculation works
A future amount is discounted by PV = FV ÷ (1 + i)^n
i is the rate per period and n the number of periods. $50,000 in 5 years at 8% is worth $50,000 ÷ 1.08^5 = $34,029.16 today.
Regular payments use the annuity formula
PV = PMT × (1 − (1 + i)^−n) ÷ i. $10,000 a year for 5 years at 8% is worth $39,927.10 today.
Payments at the start of a period are worth more
For an annuity due, multiply the payment part by (1 + i), because each payment arrives one period sooner.
Choose the rate you could earn or must pay
Use your borrowing cost or the return on your next best use of the money. A higher rate makes future money worth less today.
Worked example. A buyer offers $50,000 for your business equipment, paid in 5 years. At an 8% discount rate that promise is worth $34,029.16 today, a discount of $15,970.84 for waiting.
Present Value FAQ
What is the present value formula?
PV = FV ÷ (1 + i)^n for a single amount, where i is the rate per period and n the number of periods. For regular payments add PMT × (1 − (1 + i)^−n) ÷ i.
How do I calculate the present value of an annuity?
Multiply the payment by (1 − (1 + i)^−n) ÷ i. For payments at the start of each period, multiply that by (1 + i). Enter the payment above and set the future amount to 0.
What discount rate should I use?
Use the return you could get elsewhere with similar risk, or your cost of borrowing. Many small businesses use their loan rate or their weighted average cost of capital.
What is the difference between present value and NPV?
Present value is what future cash is worth today. Net present value subtracts the up-front cost from that present value to show whether an investment pays off.
How do I calculate present value in Excel?
Use =PV(rate, nper, pmt, [fv], [type]). Rate is per period, type is 0 for payments at the end and 1 for the start. Enter money you receive as a negative number to get a positive result: =PV(8%, 5, 0, -50000) returns $34,029.16, and =PV(6%/12, 120, -1000) returns $90,073.45.
What is present value?
Present value is what money you will receive later is worth today. Money today can earn a return, so a future dollar is worth less. $50,000 due in 5 years is worth $34,029.16 today at 8%.
How does monthly compounding change present value?
Use the monthly rate and the number of months. $1,000 a month for 10 years at 6% is 120 payments of $1,000, or $120,000 in total, but worth $90,073.45 today. Choose Monthly above to match monthly payments.
Do I need a present value table?
No. A PV table lists the factor 1 ÷ (1 + i)^n for common rates and years, such as 0.6806 for 8% and 5 years. The calculator works out the exact factor for any rate, period and payment.
Sources: Microsoft Support: PV function