Quick Definition

Present Value (PV) is the current worth of a future sum of money or stream of cash flows given a specified rate of return.

Formula

Examples

• 1Calculating the present value of a $10,000 payment to be received in 5 years with an annual discount rate of 5%.
• 2Determining the present value of an annuity that pays $500 annually for the next 10 years, using a discount rate of 3%.
• 3Evaluating a business investment that promises a payout of $50,000 in 3 years, considering a discount rate of 7%.
• 4Assessing the cost-effectiveness of a long-term lease agreement by calculating the present value of future lease payments.

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