Present Value Calculator

Present Value (PV) represents the current worth of future cash flows, discounted at a specified rate. It's a fundamental concept in finance that recognizes money available today is worth more than the same amount in the future due to its earning potential. PV helps investors and businesses make informed decisions about investments, loans, and financial planning by comparing the value of money across different time periods.

The present value is calculated using the discount formula:

Where FV is the future value, r is the annual discount rate, n is the compounding frequency per year, and t is the time in years. For annuities (regular payments), we use the annuity formula to calculate the present value of all periodic payments.

• •Higher discount rates result in lower present values, reflecting greater opportunity cost
• •The time value of money means cash flows further in the future are worth less today
• •PV is crucial for investment decisions, helping compare options with different cash flow patterns
• •More frequent compounding slightly increases the discount effect on future values