Present Value Formula

Also known as: Discounted Value Formula, PV Formula

PV = \frac{FV}{\left(1 + \frac{r}{n}\right)^{nt}}

PV = FV / (1 + r/n)^(nt)

What It Calculates

Determines how much a future sum of money is worth in today's dollars, accounting for the time value of money.

Symbol	Name	Unit	Description
PV	Present Value	$	The current worth of a future sum of money
FV	Future Value	$	The future amount of money
r	Discount Rate	decimal	The annual discount or interest rate
n	Compounding Frequency	—	Times compounded per year
t	Time	years	Years until the future value is received

1(1 + 0.07)^10 = 1.9672

2PV = 50000 / 1.9672 = $25,417.50

Result: $25,417.50

A = P(1 + r/n)^(nt)

NPV = Σ Ct / (1+r)^t

#time value of money#discounting#investment