Lump Sum Present Value

Formula:

PV = FV / (1 + r)^n

Where PV = Present Value, FV = Future Value, r = Discount Rate, n = Number of Periods

Enter the future value to be discounted
Enter the annual discount rate
Enter the number of years

Cash Flow Analysis

Sensitivity Analysis

Understanding Present Value

Present value (PV) is the current value of a future sum of money or stream of cash flows given a specified rate of return. Future cash flows are discounted at the discount rate, and the higher the discount rate, the lower the present value of the future cash flows.

Key Concepts:

  • Time Value of Money: Money available now is worth more than the same amount in the future
  • Discount Rate: The rate used to discount future cash flows to their present value
  • Net Present Value (NPV): The difference between the present value of cash inflows and outflows
  • Internal Rate of Return (IRR): The discount rate that makes NPV equal to zero