Present Value Calculator
What future money is worth today.
Details
Present value
$27,920
Worth today, discounted at 6%
Future value
$50,000
Discount (time value)
$22,080
This discounts a future amount, or a stream of future payments, back to what it is worth today.
It is the tool for comparing a lump sum against payments spread over time.
What present value means
Present value answers: what is money I will receive later worth to me today? It discounts future amounts back at a rate that reflects what you could otherwise earn.
$10,000 in ten years is not $10,000. At a 6% discount rate it is worth $5,584 today, because $5,584 invested at 6% would grow to $10,000 in that time.
The practical use is comparing a lump sum against a stream. Twenty annual payments of $50,000 total $1,000,000, but discounted at 6% they are worth $573,496 today. A $700,000 lump sum offered instead is the better deal, and the raw totals suggest the opposite.
The lump sum wins at a 6% discount rate, despite being 30% smaller on paper. The rate you use is what decides it.
What to enter
- Future amount, or payment
- A single sum arriving later, or the amount of each recurring payment.
- Discount rate
- What you could earn on the money instead. This single input decides the answer, so it deserves real thought.
- Number of periods
- How long until the money arrives, or how many payments there are.
- Payment timing
- End of period (ordinary) or start (annuity due). Payments at the start are worth slightly more.
What this assumes
A constant discount rate throughout, which is a simplification for anything long-dated.
Payments are assumed certain. A stream that might stop should be discounted at a higher rate to reflect that risk.
How to calculate present value
Divide by the growth factor. For a stream, discount each payment by its own number of periods.
- FV
- The future amount
- r
- Discount rate per period
- n
- Periods until it arrives
- PMT
- Each payment, where it is a stream
Choose a discount rate. What you could realistically earn on the money instead. A safe alternative justifies a low rate; a risky payment stream justifies a higher one.
Divide by the growth factor. For a single amount: divide by (1 + r)ⁿ. At 6% over 10 years that is dividing by 1.7908.
For a stream, use the annuity factor. It totals the discounted value of every payment in one step, rather than doing twenty separate divisions.
Compare against the alternative. Whichever present value is higher is the better offer at that rate. Try a different rate and check the answer holds.
See a worked example: the lottery question
- Option A
- $50,000 a year for 20 years
- Option B
- $700,000 today
- Discount rate
- 6%
Option A totals $1,000,000 on paper.
Discounted at 6%, its present value is $573,496.
Option B is $700,000 today, so the lump sum is worth about $126,504 more.
The answer depends on the rate. At 3% the payments are worth $743,874 and the stream wins instead, which is why the rate is the real decision.
The $700,000 lump sum, at a 6% rate
Frequently asked questions
- What discount rate should I use?
What you could realistically earn on the money instead, adjusted for risk. A guaranteed government payment justifies a low rate; an uncertain business payment justifies a high one.
There is no objectively correct figure, which is why serious analysis tests several. If the decision flips between 4% and 7%, that is the finding.
- Should I take a lump sum or annual payments?
Compare present values at a rate you could actually achieve. In the example the $700,000 lump sum beats $1,000,000 spread over twenty years at 6%, and loses at 3%.
The arithmetic is not the whole answer. A lump sum requires you to invest and not spend it; payments enforce discipline. Tax treatment differs too, and can be significant.
- Why is future money worth less?
Two reasons. Opportunity cost: money you have now could be earning. Risk: a future payment might not arrive.
Inflation is often listed as a third, and it is really part of the first, since any return you compare against also has to beat inflation.
- How is this different from NPV?
NPV is present value with the initial investment subtracted. Present value tells you what the inflows are worth; NPV tells you whether they are worth more than what you pay.
So NPV is the decision tool for a project, and present value is the building block it uses.
- Does this work for uneven payments?
Yes, but the annuity shortcut does not. Discount each payment individually by its own number of periods, then add them up.
The NPV page handles uneven series directly, which is usually the easier route for anything irregular.
- Is present value the same as inflation adjustment?
No, though they look similar. Inflation adjustment converts for changes in buying power. Present value discounts for opportunity cost and risk.
The discount rate is usually well above the inflation rate, because it reflects what the money could earn, not just what prices did.
Problems people actually run into
Comparing offers on face value
$1,000,000 over twenty years reads as more than $700,000 today, and at any realistic discount rate it is not.
Always discount before comparing. The longer the payments stretch out, the larger the gap between face value and actual worth.
Using one discount rate and stopping there
The rate decides the answer. At 6% the lump sum wins by $126,504; at 3% the payment stream wins instead.
Test a range. If the conclusion holds across the rates you might plausibly achieve, it is robust. If it flips, the honest answer is that the two offers are close.
Results are estimates for general information only and are not professional financial, medical, or legal advice. Read our full disclaimer.
Last updated: September 4, 2026
