Present Value Calculator

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What Is Present Value?

Present value (PV) is the current value of a future sum of money or stream of cash flows. It is determined by discounting the future value by the estimated rate of return that the money could earn if invested. Present value calculations can be useful in investing and in strategic planning for businesses.

Key Takeaways

  • Present value (PV) is based on the concept that a particular sum of money today is likely to be worth more than the same sum in the future because it can be invested and earn a return in the meantime.
  • Present value calculations require an estimate of that potential rate of return, known as the discount rate.
  • Because the discount rate can only be estimated, if it is inaccurate, the present value calculation will be off as well.
  • Investors can also calculate future value (FV) by applying an estimated rate of return to a sum of money's value today.

Learn more at Investopedia