Calculate the present value of a future lump sum or series of cash flows using discounted cash flow (DCF) analysis.
Future Value Calculator
| Year | PV of $ | Discount factor |
|---|
Present Value (PV) is the current worth of a future sum of money, discounted at a specific rate. The core concept is the time value of money: a dollar today is worth more than a dollar in the future because today's dollar can be invested and grow. PV answers: "How much is that future payment worth to me right now?"
| Future Amount | Years Away | Discount Rate | Present Value |
|---|---|---|---|
| $100,000 | 5 years | 5% | $78,353 |
| $100,000 | 5 years | 8% | $68,058 |
| $100,000 | 10 years | 5% | $61,391 |
| $100,000 | 10 years | 8% | $46,319 |
| $500,000 | 20 years | 6% | $155,928 |
$100,000 received in 10 years is worth only $61,391 today at a 5% discount rate — because $61,391 invested today at 5% would grow to $100,000 in 10 years. The choice of discount rate is the critical variable: higher discount rates produce lower present values.
The discount rate represents the opportunity cost — what you could earn by investing the money elsewhere at similar risk. Common choices: risk-free rate (RBA cash rate + credit spread, approximately 5-6% in 2026), weighted average cost of capital (WACC) for businesses, or an expected market return (7-9%) for investment comparisons.
What is present value in simple terms?
Present value is how much a future sum of money is worth today. Because money today can be invested and grow, $100,000 in 10 years is worth less than $100,000 today. At a 6% discount rate, $100,000 in 10 years has a present value of approximately $55,839 — meaning if you invested $55,839 today at 6%, it would grow to $100,000 in 10 years.
What discount rate should I use for present value calculations?
The discount rate should reflect the opportunity cost — what you could earn on an alternative investment of similar risk. Common choices: RBA cash rate + 1-2% (~6-7%) for low-risk comparisons, 8-10% for moderate-risk business decisions, or 12%+ for high-risk ventures. Higher discount rates produce lower present values, reflecting that future money is worth less when alternatives offer higher returns.
What is the difference between present value and net present value?
Present Value (PV) calculates the current worth of a single future amount. Net Present Value (NPV) sums the present values of all cash flows (both inflows and outflows) over a project's life. NPV is used for investment and business decisions — a positive NPV means the project creates value; negative NPV means it destroys value relative to the discount rate used.