Calculate present value from a given future value.
Present value refers to the current worth of a future sum of money or a series of cash flows. It is a way to evaluate the value of future cash flows in today's terms, taking into account the time value of money. Due to various factors such as inflation, opportunity costs, and the uncertainty of receiving the expected amount in the future, money received in the future is generally considered less valuable than money received in the present. Therefore, by discounting future cash flows, the present value provides a way to determine what that amount would be worth in today's terms.
The calculation of present value involves the future cash flows and the discount rate. The future cash flows can be a single amount to be received in the future or a series of cash flows occurring at different time intervals. The discount rate represents the rate of return or interest rate that reflects the time value of money and the risk associated with the cash flows. This calculator offers a choice of compounding ranging from daily to annual to calculate the present value.