Present Value Calculator
Calculate the present value of a future sum of money or cash flow based on a given rate of return and investment period. The present value is the current worth of a future amount when discounted at a specific interest rate.
Present Value: $0.00
| FV (Future Value) | $0.00 |
|---|---|
| Total Principal | $0.00 |
| Total Interest | $0.00 |
Present Value: $0.00
| Total Periodic Deposits | $0.00 |
|---|---|
| Total Interest | $0.00 |
About Present Value Calculator
The Present Value (PV) is the current worth of a future sum of money or stream of cash flows given a specified rate of return. Future cash flows are discounted at the discount rate, and the higher the discount rate, the lower the present value of the future cash flows.
How to Calculate Present Value
The formula for calculating present value is:
PV = FV / (1 + r)^n
Where:
- PV = Present Value
- FV = Future Value
- r = Rate of return (interest rate)
- n = Number of periods
For periodic deposits (annuity), the formula is more complex and depends on whether payments are made at the beginning or end of each period.
Why Present Value Matters
Present value is a core concept in finance that allows investors and financial managers to compare cash flows at different times on a meaningful basis. It's used in:
- Investment analysis to determine if an investment is worthwhile
- Loan amortization and mortgage calculations
- Retirement planning to determine how much to save now for future needs
- Business valuation to estimate the current worth of future earnings