A dollar today is worth more than a dollar arriving later, because today’s dollar can be invested and grow. This puts an exact number on how much more.
How it works
Present value
PV = FV ÷ (1 + r)ⁿ
FV is the future amount, r is the discount rate, n is the number of periods.
The discount rate is a judgment call, not a fact
A higher assumed rate makes any future sum worth less today — choosing 4% versus 8% for the identical future amount can change the present value substantially. There’s no single correct discount rate; it should reflect what the money could otherwise earn at a comparable risk level, which is a real decision this calculator can’t make for you.
How to use this calculator
- Enter the future amount.
- Enter the discount rate and number of years.
- Read what that future sum is worth today.
Frequently asked questions
What discount rate should I use?
Whatever the money could otherwise earn at a similar risk level — often an expected investment return, or a company’s cost of capital in a business context. There’s no universal correct answer.
How is this related to the future value calculator?
The mirror image — this discounts a future sum back to today; that one grows a present sum forward. Running the same numbers through both should return you to where you started.
Why does present value shrink so much over long periods?
Because the discounting compounds — the same percentage reduction applies every period, so the effect multiplies rather than adds, similar to how compound interest grows a sum increasingly quickly the other direction.
Can present value ever exceed the future value?
Only with a negative discount rate, an unusual assumption reflecting an expectation that money will be worth more in the future than now — not the typical case this calculator is built around.
Is this used for anything beyond personal finance?
Yes — present value is foundational to how businesses evaluate long-term investments, bonds are priced, and pensions are valued, all built on the identical discounting logic shown here.
