Present Value
$7,835
Future Value
$10,000
Discount Amount
$2,165
Present Value
$7,835
today's value
$7,835
$10,000
$2,165
21.6%
Present value (PV) is the current worth of a future sum of money, discounted at a specific interest rate. It shows how much money you would need to invest today to have a certain amount in the future.
Present Value = Future Value / (1 + Interest Rate)^Number of Years. This formula accounts for the time value of money, showing that money today is worth more than the same amount in the future.
Time value of money is the concept that money available today is worth more than the same amount in the future due to its potential earning capacity. This is why we discount future values to find present value.
The discount rate depends on your opportunity cost or required return. Common rates: Risk-free rate (3-4%), Expected investment return (7-10%), Cost of capital (varies by company). Use a rate that reflects your alternative investment options.
Inputs
Result
To have $10,000 in 5 years at a 5% discount rate, you would need $7,835 today. The calculation is $10,000 / (1.05)^5 = $7,835. The discount amount of $2,165 represents the time value of money -- what you would earn by investing $7,835 at 5% for 5 years.
Inputs
Result
A future payment of $50,000 in 10 years is worth $25,417 today at a 7% discount rate. The formula is $50,000 / (1.07)^10 = $25,417. Nearly half the value ($24,583) is lost to discounting, illustrating how a higher rate and longer time period significantly reduce present value.
PV = FV / (1 + r)^nCalculates the current worth of a future sum of money, discounted at a given interest rate over a number of years.
Where:
PV= Present value (today's value)FV= Future value (the amount to be received in the future)r= Discount rate / interest rate (as a decimal)n= Number of yearsDiscount = Future Value - Present ValueThe difference between the future value and present value, representing how much value is lost due to the time value of money.
Where:
Discount= Amount lost to discounting over timeFuture Value= The amount to be received in the futurePresent Value= Today's equivalent valuePresent value calculates the current worth of future money using discounting.
The time value of money means money today is worth more than the same amount in the future.
Present value helps compare investments and financial decisions across different time periods.
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Last Updated: Feb 12, 2026
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