Present Value Interest Calculator
Calculate present value of future cash flows. Useful for investment decisions and understanding fair value.
Present Value Interest Calculator
Result
How it works
Formula Used
PV = FV / (1 + r)^n r = discount rate, n = number of years
Smart Tips
- Higher discount rate = lower present value
- Use cost of capital as discount rate
- Essential for project appraisal and bond valuation
Best Used For
Investment appraisal, loan/bond valuation decisions
FAQs
What discount rate should I use?
For investments: use expected return rate (8-10% for equity). For loans: use loan interest rate. For projects: use cost of capital. Essentially, what return could you earn elsewhere (opportunity cost).
Should I take ₹1L now or ₹1.5L in 5 years?
Calculate PV of ₹1.5L in 5 years at your opportunity cost. At 8% rate, PV = ₹1.02L. So ₹1L today is slightly worse. At 5% rate, PV = ₹1.18L. So ₹1.5L in 5 years is better. It depends on rates.
Why is present value important for bonds?
Bond price = PV of all future coupons + principal repayment. Higher interest rates = lower bond prices (PV decreases). This is why bond prices fall when rates rise. Understand PV = understand bonds.
Can I use PV to evaluate business opportunities?
Yes. PV all projected cash flows of business, subtract investment cost. If positive NPV (PV of inflows > investment), it's worth doing. If negative, reject. Standard for business appraisal.
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