Discount Rate

The Present Value of future money

The value of future money can be calculated to present worth or present value with the "discount rate" as

P = F / (1 + i)ⁿ         (1)

where

F = future cash flow (positive for receipts, negative for disbursements)

PV = present value

i = discount rate

n = number of interest periods

The factor "1 / (1 + i)ⁿ" is known as the "single payment present worth factor".

Present Value - Online Calculator

F - single future cash flow

i - discount rate (%)

n - number of periods

Example - Present Value

The present value of a future cash flow 1 in period 10 with a discount rate 5% can be calculated as

P = 1/ (1 + 5/100)¹⁰

    = 0.61

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