.pv-calculator-wrapper {
max-width: 800px;
margin: 0 auto;
font-family: -apple-system, BlinkMacSystemFont, "Segoe UI", Roboto, Helvetica, Arial, sans-serif;
color: #333;
line-height: 1.6;
}
.pv-calc-container {
background: #f9f9f9;
border: 1px solid #e0e0e0;
border-radius: 8px;
padding: 25px;
box-shadow: 0 4px 6px rgba(0,0,0,0.05);
margin-bottom: 30px;
}
.pv-calc-title {
text-align: center;
margin-bottom: 25px;
color: #2c3e50;
font-size: 24px;
font-weight: 700;
}
.pv-input-group {
margin-bottom: 20px;
}
.pv-input-group label {
display: block;
margin-bottom: 8px;
font-weight: 600;
color: #444;
}
.pv-input-group input {
width: 100%;
padding: 12px;
border: 1px solid #ddd;
border-radius: 4px;
font-size: 16px;
box-sizing: border-box;
}
.pv-input-group input:focus {
border-color: #3498db;
outline: none;
}
.pv-btn {
background-color: #3498db;
color: white;
border: none;
padding: 15px 30px;
font-size: 18px;
border-radius: 4px;
cursor: pointer;
width: 100%;
font-weight: bold;
transition: background 0.3s;
}
.pv-btn:hover {
background-color: #2980b9;
}
.pv-results {
margin-top: 25px;
padding: 20px;
background: #fff;
border-left: 5px solid #3498db;
display: none;
}
.pv-result-row {
display: flex;
justify-content: space-between;
margin-bottom: 10px;
border-bottom: 1px solid #eee;
padding-bottom: 10px;
}
.pv-result-row:last-child {
border-bottom: none;
margin-bottom: 0;
padding-bottom: 0;
}
.pv-result-label {
font-weight: 600;
color: #555;
}
.pv-result-value {
font-weight: 700;
color: #2c3e50;
font-size: 18px;
}
.pv-highlight {
color: #27ae60;
font-size: 22px;
}
.pv-article h2 {
color: #2c3e50;
margin-top: 30px;
border-bottom: 2px solid #eee;
padding-bottom: 10px;
}
.pv-article p {
margin-bottom: 15px;
}
.pv-article ul {
margin-bottom: 15px;
padding-left: 20px;
}
.pv-article li {
margin-bottom: 8px;
}
.pv-formula-box {
background: #eef7fb;
padding: 15px;
border-radius: 4px;
text-align: center;
font-family: "Courier New", monospace;
font-weight: bold;
margin: 20px 0;
}
function calculatePresentValue() {
// Get inputs strictly by ID
var fvInput = document.getElementById('futureValue');
var rateInput = document.getElementById('discountRate');
var periodsInput = document.getElementById('numPeriods');
var resultDiv = document.getElementById('pvResult');
// Parse values
var fv = parseFloat(fvInput.value);
var rate = parseFloat(rateInput.value);
var periods = parseFloat(periodsInput.value);
// Validation
if (isNaN(fv) || isNaN(rate) || isNaN(periods)) {
alert("Please enter valid numeric values for all fields.");
return;
}
if (periods < 0) {
alert("Time period cannot be negative.");
return;
}
// Calculation Logic: PV = FV / (1 + r)^n
var decimalRate = rate / 100;
var compoundingFactor = Math.pow((1 + decimalRate), periods);
var pv = fv / compoundingFactor;
var discountFactor = 1 / compoundingFactor;
// Formatting currency
var formatter = new Intl.NumberFormat('en-US', {
style: 'currency',
currency: 'USD',
minimumFractionDigits: 2,
maximumFractionDigits: 2
});
// Update DOM
document.getElementById('displayFV').innerText = formatter.format(fv);
document.getElementById('displayFactor').innerText = discountFactor.toFixed(4);
document.getElementById('displayPV').innerText = formatter.format(pv);
// Show results
resultDiv.style.display = 'block';
}
Understanding Discount Rate and Present Value
The concept of Present Value (PV) is a cornerstone of financial modeling and investment analysis. It allows individuals and businesses to determine what a future sum of money is worth today. This calculation relies heavily on the Discount Rate, which represents the opportunity cost of capital or the required rate of return.
Money has a "time value," meaning a dollar received today is worth more than a dollar received in the future due to its potential earning capacity. By applying a discount rate to future cash flows, we can "discount" them back to the present day to make fair comparisons between investment options.
The Present Value Formula
To calculate the present value of a single future cash flow, we use the following mathematical formula:
PV = FV / (1 + r)n
Where:
- PV = Present Value (what the money is worth today)
- FV = Future Value (the amount of money to be received in the future)
- r = Discount Rate (expressed as a decimal, e.g., 0.05 for 5%)
- n = Number of periods (typically years) until the money is received
Choosing the Right Discount Rate
The accuracy of your Present Value calculation depends entirely on selecting an appropriate discount rate. In finance, this rate often reflects the risk associated with the future cash flow.
- Risk-Free Rate: Often based on government bonds (e.g., U.S. Treasury yields), used for guaranteed returns.
- Weighted Average Cost of Capital (WACC): Used by companies to evaluate business projects.
- Required Rate of Return: An investor's personal threshold for how much they expect to earn (e.g., 8% or 10%).
Real-World Example
Imagine you have the option to receive $10,000 five years from now. If your alternative investment option (like a stock market index fund) historically returns 7% per year, you would use 7% as your discount rate to determine what that $10,000 is worth to you today.
Using the calculator above:
- Future Value: $10,000
- Discount Rate: 7%
- Years: 5
- Resulting Present Value: $7,129.86
This means if someone offered you $7,200 today, you should take it, because it is more than the present value of waiting five years for $10,000 at your expected rate of return.