Present Value Calculator
Enter a future amount, a discount rate and the number of years to compute its equivalent value in today's dollars.
Input Data
Results
At a glance:Present value brings a future amount back to today. PV = future amount ÷ (1 + discount rate)^years; discount amount = future amount − PV. A higher rate or a longer horizon lowers the present value.
Formula
Present value = future amount ÷ (1 + discount rate)^years.
Discount amount = future amount − present value.
How to Use
- Enter the future amount.
- Enter the annual discount rate and the years.
- Read the present value and the discount amount.
FAQ
Is present value related to inflation adjustment?
The concepts are close but the uses differ. Inflation adjustment discounts purchasing power using price rises; present value discounts using your opportunity cost or required return. If you set the discount rate equal to the inflation rate, the two numbers coincide.
What discount rate should I use?
Use your opportunity cost or required return: conservative investments about 3-5%, equities long-term 7-10%. The higher it is, the more you 'value the present' and the lower the PV. This is a subjective but crucial input.
Why is a future HK$1 million worth only HK$555k in 15 years?
Because at 4% compounding for 15 years, HK$555k grows to HK$1 million; reversed, the today's value of HK$1 million is HK$555k. This reflects the time value of money and the two-way nature of compounding.
How do I use it for compensation or instalments?
Discount each future compensation payment separately and sum them to get the 'settlement present value'. This tool handles a single amount; for a stream, use the annuity present value concept or sum each payment.
How is it different from annuity future/present value?
This tool discounts a SINGLE future amount; an annuity is a SERIES of regular amounts. Use this tool for a lump sum, and the annuity formula for recurring payments.
Can the discount rate be negative?
In theory, if your required return is negative (e.g. deflation with a negative risk-free rate), the formula still works and the PV would exceed the future amount. In practice this is rare.
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References
Content review: Calculatorism Science Team. Results are for reference only; please refer to the relevant authorities for the official figures.