Present Value Calculator
A dollar today is worth more than a dollar tomorrow. Present value quantifies exactly how much more, using a discount rate that reflects opportunity cost and risk.
Discount Rates Around the World
Different institutions use different discount rates for evaluating future cash flows:
| Context | Typical Discount Rate | Source / Authority |
|---|---|---|
| 🇺🇸 US Government projects | 2–7% (varies) | US OMB Circular A-94 |
| 🇬🇧 UK public spending | 3.5% real | HM Treasury Green Book |
| 🇪🇺 EU infrastructure | 5% real | European Commission |
| Corporate WACC (global) | 8–12% | Damodaran estimates |
| Personal investing | 6–8% | Expected S&P 500 real return |
Frequently Asked Questions
What is present value (PV)?
Present value is today's worth of a future sum of money, discounted by a rate that reflects the time value of money and risk. The formula is PV = FV / (1 + r)^n, where FV is the future value, r is the discount rate, and n is the number of years.
What discount rate should I use?
For personal finance decisions, many people use 5–8% to reflect expected investment returns. For business projects, companies use their Weighted Average Cost of Capital (WACC), typically 8–12%. The UK Treasury's Green Book recommends a 3.5% real discount rate for public projects. The US OMB uses varying rates depending on the policy area.
Why is present value important?
Present value lets you compare cash flows that occur at different times on equal footing. It's the foundation for investment valuation, bond pricing, pension obligations, and structured settlement analysis. Without PV, you can't meaningfully compare a payment today against one 10 years from now.