Present Value Formula

Money has a time value: a dollar today is worth more than a dollar later because today's dollar can earn a return in between.

The formula

PV = FVₙ / (1 + Rₙ)ⁿ

The value today of a single future cash flow, discounted by the cost of capital across n periods.

What goes into it

Future value at period n (FVₙ)
Interest rate per period (Rₙ, %)
Number of periods (n)

Worked example

Future value (FV₁)	$500,000
Discount rate (R)	5%
Periods (n)	1
Present value (PV)	≈ $476,190

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