Present Value of a Lump Sum Calculator

How it is calculated

The tool discounts one future amount back to today with annual compounding: PV = FV ÷ (1 + rate ÷ 100)years. FV is the amount you will receive in dollars, the rate is the yearly discount rate as a percentage (5 means 5%), and years is the waiting time, which may be fractional such as 2.5. It also shows the discount amount, FV − PV. The future value and years cannot be negative, and the rate must be above −100%. A rate of 0 or a wait of 0 years returns the future amount unchanged, and a negative rate gives a present value larger than the future amount. There is one payment only; for a stream of equal payments an annuity formula is needed.

Common mistakes

• Typing the rate as a decimal. Enter 5 for 5%; entering 0.05 treats it as 0.05% and gives a present value barely below the future amount.
• Choosing an unrealistic discount rate. The answer is very sensitive to it, so a figure like 3% and one like 8% over 20 years produce very different present values.
• Entering months in the years field. A 6-month wait is 0.5 years, not 6.
• Using the tool for several payments. It values a single lump sum, so adding up several future payments each at their own year is needed, or an annuity tool for equal ones.
• Forgetting that the discount rate is not the same as inflation or an interest rate you earn. Pick the rate that matches the risk and the alternative use of the money.