Calculate the present value of a future sum of money, discounted at a given rate — a core time value of money concept.
Present value is the current worth of a future sum of money, discounted back using a chosen interest or discount rate.
Present value equals future value divided by (1 plus discount rate) raised to the number of years.
Enter the future amount, the annual discount rate, and the number of years, then click Calculate.
Example: 10 lakh rupees received 10 years from now, discounted at 8%, is worth approximately 4.63 lakh rupees today.
Why discount future money. Money today can be invested and grow, so a rupee today is worth more than a rupee received in the future, this is the time value of money.
What discount rate should I use. It typically reflects your expected investment return or the cost of capital, commonly 6 to 12 percent for personal finance.