Finance
Present Value Calculator: Future Money in Today's Dollars
Understand present value and evaluate future cash flows in today's dollars.
Present value calculates what a future sum is worth today.
Formula
PV = FV / (1 + r)^n.
Why PV Matters
- Investments: Compare different timelines
- Valuation: Value from future cash flows
- Lottery: Lump sum vs annuity
- Retirement: How much to save today
Discount Rate
Reflects opportunity cost and risk. Higher rates reduce PV.
NPV
Sum of PVs minus initial investment. Positive NPV = profitable.
Frequently Asked Questions
What is PV?
Current worth of a future sum, discounted at a specific rate.
Discount rate?
Use expected return, cost of capital, or inflation rate.
PV vs NPV?
PV = single amount. NPV = multiple cash flows minus investment.