Present value
The value today of an amount expected in the future after applying a discount rate.
Definition
The value today of an amount expected in the future after applying a discount rate.
Why this concept matters
It helps compare a future amount with effort or capital available today.
How it works
The calculation works back from the future amount to today by removing the discount rate period by period.
Calculation guide : Present value = future value ÷ (1 + rate) ^ time
What to watch
The result is highly sensitive to the discount rate selected.
Simple example
Receiving £10,000 in ten years is worth less than £10,000 today when the discount rate is positive.
Example currency : United Kingdom (GBP). The reference country controls the example currency.
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