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    Present Value Formula — Time Value of Money

    Present value tells you what a future sum of money is worth today. ₹1 lakh received 10 years from now is worth less than ₹1 lakh today because of the time value of money.

    Present Value Formula

    PV = FV / (1 + r)^n

    Where:

    • PV = Present value (value today)
    • FV = Future value
    • r = Discount rate (per period)
    • n = Number of periods

    Step-by-Step:

    1. 1

      Identify future value

      The amount you'll receive in the future.

    2. 2

      Choose discount rate

      Your opportunity cost or required return rate.

    3. 3

      Calculate

      Divide FV by (1+r)^n to find today's equivalent.

    Worked Examples:

    Future payment valuation

    FV: ₹10LRate: 10%Years: 5

    Result: PV = ₹6.21L

    10,00,000 / (1.10)^5 = 10,00,000 / 1.6105 = ₹6,20,921

    Frequently Asked Questions