Present Value Calculator
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What is Present Value?
Present value is the current value of an expected income in future.
Present value is usually less than the future value because money earns interest.
This calculation is helpful to make comparisons between cash flows that don’t occur at simultaneous times.
The Present Value Calculator makes the math easy by converting any future lump sum into today’s amount so that we have a realistic idea of the value received.
PV Formula and Calculation:
Present Value= PV = FV/(1+r)n
where:
PV = Present Value
FV= Future Value
r= Rate of return (Periodic)
n= Number of periods
Example:
Imagine if John owes you $10,000 and he promises to pay you back after three years. If we calculate the present value of that future $10,000 with an inflation rate of 6%. What would be the present value?
PV = FV/(1+r)n
Here,
FV= 10000
R= 6% ; r = R/100 = 0.6
n= 3
PV = 10000/(1+0.6)3
PV = 10000/1.1910
PV = $8,396
Using the calculator above, the result will be $8,396.