How to use this calculator
- Enter the future amount you will receive.
- Enter the discount rate per period, your required return or alternative interest rate.
- Enter the number of periods and, optionally, a payment received each period.
Formula
Present value discounts each future cash flow back to today. A lump sum is divided by (1 + i)^n, and an annuity of equal payments uses the present-value annuity factor.
PV = FV / (1 + i)^n + PMT × (1 − (1 + i)^−n) / i
Annuity due: multiply the payment term by (1 + i)
Example
- You'll receive $10,000 in 10 years and could otherwise earn 5% per year.
- PV = 10,000 / 1.05^10 = 10,000 / 1.628895 ≈ $6,139.13.
Frequently asked questions
What discount rate should I use?
Use the return you could earn on an investment of similar risk. Higher risk usually means a higher discount rate and a lower present value.
What is NPV?
Net present value is the present value of all future cash flows minus the upfront cost. A positive NPV means the investment beats your discount rate.
Is a lottery lump sum better than annual payments?
Compare the lump sum with the present value of the annual payments at your expected return. Taxes may also differ between the two options.