Present Value Calculator Formula

Understand the math behind the present value calculator. Each variable explained with a worked example.

Use the Present Value Calculator

Formulas Used

Present Value

present_value = future_value / pow(1 + annual_rate / 100, years)

Discount Amount

discount_amount = future_value - future_value / pow(1 + annual_rate / 100, years)

Discount Factor

discount_factor = 1 / pow(1 + annual_rate / 100, years)

Variables

VariableDescriptionDefault
future_valueFuture Value(USD)100000
annual_rateDiscount Rate (Annual)(%)5
yearsNumber of Years(years)10

How It Works

How to Calculate Present Value

Present value determines what a future amount of money is worth today, given a specified discount rate.

Formula

PV = FV / (1 + r)^n

Where:

  • PV = Present value
  • FV = Future value
  • r = Discount rate (as decimal)
  • n = Number of years

    • Worked Example

    You will receive $100,000 in 10 years. What is it worth today at a 5% discount rate?

    future_value = 100000annual_rate = 5years = 10
    1. 01PV = $100,000 / (1 + 0.05)^10
    2. 02PV = $100,000 / (1.05)^10
    3. 03PV = $100,000 / 1.6289
    4. 04Present Value = $61,391.33
    5. 05Discount amount: $100,000 - $61,391.33 = $38,608.67

    Ready to run the numbers?

    Open Present Value Calculator