Present Day Value Calculator

Formula

To calculate the Present Day Value (PDV):

\[ PV = \frac{FV}{(1 + r)^n} \]

Where:

$ PV $ is the Present Value (\$)
$ FV $ is the Future Value (\$)
$ r $ is the interest rate (decimal)
$ n $ is the number of periods

What is Present Day Value?

Present Day Value (PDV), also known as Present Value, is a financial concept that involves calculating the worth of a future amount of money in today’s terms, considering the time value of money. It is based on the principle that a dollar today is worth more than a dollar in the future due to potential earning capacity. This concept is used in finance to compare cash flows that occur at different times, as it discounts future cash flows to the present, taking into account the risk and return associated with the time value of money.

Example Calculation

Let's assume the following values:

Future Value $ FV $ = $10,000
Interest Rate $ r $ = 0.05 (5%)
Number of Periods $ n $ = 10 years

Step 1: Use the PV calculation formula:

\[ PV = \frac{10,000}{(1 + 0.05)^{10}} = \frac{10,000}{1.62889} \approx 6139.13 \]

The Present Value is approximately $6,139.13.