Present value of a future amount of money is basically nothing but compound interest reversed. The Present Value Calculator lets you find the amount that you should invest somewhere today to raise it to a certain amount in future. One of the most important uses of this is in stock valuation. The calculator also helps in calculation of periodical annuity payments.
As mentioned earlier, PV refers to present value of certain amount of money in future after investing it somewhere and growing it at compound rate.
Net Present Value itself is an interesting and popular finance concept and is often referred to as NPV. However, it is really important to discern Present Value from Net Present Value. Present Value is often associated with learning of broad financial concepts. It is also used widely in the financial calculators as well. Net Present Value, on the other hand, is used commonly in our everyday life. It is used commonly in financial accounting and analysis. There is a slight difference in these two, however. Where PV is a representation of present value of cash flow or a certain amount of money, NPV actually represents net amount of all the cash inflows as well as cash outflows. The NPV concept is same like calculating a business’ net income after deduction of expenses and revenues. The word Net refers to combining positive as well as negative values to come up with a certain figure.
NPV can be taken as a standard option when it comes to making investment decision. PV calculations are used by businesses in calculating capital expenditures as well as doing routine planning. Likewise, smart people always take their finances just like any business does and make use of NPV for better financial planning for their family.
Present Value is really one significant element of Time Value of Money among FV, PMT, N and I/Y. You don't have any concept of credit cards, auto loans or mortgages if there is no PV.
The Time Value of Money, basically, refers to the increase in amount of money that the lender expects after making it available to the borrower for a certain period of time. Obviously, nobody would like to keep their money bound for nothing and if they agree to lend it and receive it over a period of time in installments then they'd want to have it increased to a certain extent.
Another aspect of this thing is that when someone lends their money then they want to have it back in one go rather than installments spanning over several months. Immediate availability of cash allows them to use it in lots of other ways but if they don't get such a deal then they want something in return. And, at a certain rate, they want their principal amount to be increased. This determines the future value of the said amount of cash according to the given rate.
This concept, basically, forms the basis of entire finance and economists often rely on this.
Our present value calculator allows you to accurately calculate present value of a certain future amount of money. You have to provide the Future Value, Number of periods and Interest per year percentage and just hit the Calculate button to be able to get the desired result. Beside Present Value, the calculator also shows you the total amount of interest that will accumulate in the provided period of time.
Besides, this present value calculator can also be used for calculating the Present Value for periodic deposits as well. You can also specify if the deposit will be made at the start of every compound period or at its end. By providing number of periods along with interest per year and periodic deposit amount, you can be able to calculate future value, present value, total principal and total interest.
The present value calculator works accurately and gives you exacting measures. It is really a reliable option for calculating PV.