Present Value Calculator
Written by Thierno Sadou Diallo, formula verified per our methodology • Last checked on 9/5/2026
Present value is calculated with PV = future value ÷ (1 + rate)^number of years. Receiving €10,000 in 10 years, discounted at 5% a year, is worth about €6,139 today.
Explanation
Present value answers a central question in finance: how much is a sum you'll receive (or spend) in the future worth today? This calculation rests on the principle that money has a time value: a dollar available today is worth more than a dollar available in ten years, because it can be invested and earn interest in the meantime (see our compound interest calculator, which does the reverse calculation: the future value of a sum invested today). The discount rate used reflects both the return you could earn by investing the money elsewhere, and a risk or uncertainty premium specific to the future sum in question. This calculation is used in particular to compare cash flows at different dates on a common basis, evaluate the profitability of an investment, or work out how much to save today to reach a specific future financial goal.
Example: €10,000 in 10 years, discounted at 5%
Inputs
Future value: €10,000. Discount rate: 5% a year. Term: 10 years.
Calculation
Present value = 10,000 ÷ (1.05)^10 = 10,000 ÷ 1.628895 ≈ €6,139.13.
Result
Receiving €10,000 in 10 years is worth about €6,139.13 today, at this discount rate.
Frequently asked questions
How do I choose the discount rate to use?
The discount rate generally reflects the return you could earn by investing the same sum elsewhere (opportunity cost), adjusted for a premium reflecting the uncertainty or risk tied to the future sum. A higher rate reduces the present value of a future sum more, since it reflects a stronger preference for money available right away.
What's the difference between present value and compound interest?
They are two sides of the same mathematical relationship, used in opposite directions: compound interest starts from a present sum to calculate its future value after some time invested, while present value starts from a future sum to find what it represents today. Both calculations use the same formula, simply rearranged.
Why does present value decrease with a higher rate or a longer term?
Because a higher rate or a longer term both mean that a smaller sum today would be enough, once invested at that rate for that term, to reach the same future value. Present value and the discount rate therefore move in opposite directions, as do present value and the term.