Present Value of Future Money Calculator
Present Value Calculator
What Is Present Value?
Present value is the current value of the future sum of money, at a specified rate of return. The future cash flows would be discounted. The higher the discount rate, the lower is the present value of the future cash flows, and vice versa. Determining the appropriate discount rate is essential for valuing future cash flows, as present value helps you understand that a sum of money today is worth more than the same amount received in the future.
What Is Present Value Calculator?
The present value calculator is a useful tool that helps determine the current value of a future sum of money. It works like compound interest in reverse, allowing you to estimate how much you need to invest today to reach a specific financial goal in the future.
Formula For Present Value Calculator
The present value calculator calculates the present-day value (PV) of an amount that you receive in the future, the formula for which is given below:
PV = C / (1+r)^n
Where,
- PV = Present Value
- C = Cash Flow at a period
- n = number of period
- r = rate of return
Example For Present Value Calculator
Let us suppose that you need Rs 1,00,000 precisely five years from today. You expect to earn 8% from an investment. The number of periods would be five.
C = Rs 1,00,000
n = 5
r = 8%
Inserting these values in the formula given below:
PV = 1,00,000 / (1+0.08)^5
PV = Rs 68,058.
Therefore, the present value amounts to Rs 68,058.
How To Use ClearTax Present Value Calculator?
The ClearTax Present Value Calculator shows the present value of a fixed sum in the future. To use the Present Value Calculator:
- Enter the future amount
- Enter the interest rate per year
- Enter the number of year’s.
The ClearTax Present Value Calculator will show you the present value of the amount that you seek at a future date.
Benefits Of ClearTax Present Value Calculator
- The ClearTax Present Value Calculator helps you to assess the future benefits of investments.
- It helps you choose the best investment according to your investment goals and risk profile.
- It helps you select the best annuity plans.
- You can gauge the cost of an investment.
- It helps you determine the present value of retirement goals.
In conclusion, a present value calculator is a simple yet powerful tool that helps you plan better by understanding the true worth of future money today. It enables smarter financial decisions by showing how much to invest now to meet future goals.
Frequently Asked Questions
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