Present value, also known as discounted value describes how much a future sum of money is worth today.

The present value is conversely related to the discount rate. Thus, a higher discount rate implies a lower present value and vice versa.

**Formula to calculate present value.**

r = rate of return.

n= number of periods.

**Example:**

An investor invested for 5 years in a certain project with a 5% rate of return and earned $ 100,000. Determine the present value.

Thus, the present value is $ 78,353.62.