What is a stream of future income worth today? Buyers of small businesses, rental properties and royalty streams ask it; so do lawyers estimating lost earnings, landlords comparing leases with step-up rents, and anyone weighing a payout schedule against a lump sum. When the amounts change from period to period, each one has to be discounted on its own. This calculator does that and summarizes the stream three ways: its total present value, the level payment it is equivalent to, and how far in the future its value sits on average.
How to use the calculator
- List the cash flows in order, one per line, starting with period 1. Use 0 for empty periods and
1500x24style shorthand for repeated amounts. - Enter the discount rate per year — the return you require on money at this level of risk.
- Choose the period length: year, quarter or month.
- Choose whether amounts arrive at the end or start of their periods.
The table shows each amount’s discount factor, present value and share of the total; the chart shows how much of each cash flow survives discounting.
Present value formula
For start-of-period timing, use exponent k − 1. The equivalent level amount solves PV = A × [1 − (1 + r)−N] ÷ r for A, and the PV-weighted timing is Σ k × PVk ÷ PV.
Worked example
A small service contract is expected to pay $12,000, $12,000, $15,000, $15,000 and $18,000 at the end of each of the next five years. You require 7%.
| Year | Cash flow | Discount factor | Present value | Share of value |
|---|---|---|---|---|
| 1 | $12,000 | 0.93458 | $11,214.95 | 19.3% |
| 2 | $12,000 | 0.87344 | $10,481.26 | 18.0% |
| 3 | $15,000 | 0.81630 | $12,244.47 | 21.0% |
| 4 | $15,000 | 0.76290 | $11,443.43 | 19.7% |
| 5 | $18,000 | 0.71299 | $12,833.75 | 22.0% |
- Present value: $58,217.87, against $72,000 undiscounted
- Equivalent level amount: $14,198.80 a year for five years
- PV-weighted average timing: 3.07 years
At 5% the same contract is worth $61,714.50; at 9%, $55,017.23. Paying more than the present value at your required rate means accepting a lower return than you wanted.
A monthly example: step-up rent
A tenant will pay $1,500 a month for 12 months, then $1,600 for 12 months. Discounted at 6% a year (0.48676% a month), the 24 payments are worth $34,996.11 today — the same as a flat $1,548.54 a month. That level figure is a clean way to compare a step-up lease with a flat-rent offer.
Tips for valuing income streams
- Pick the rate to fit the risk. A contract with a reliable customer deserves a lower rate than speculative royalties.
- Use cash, not promises. Subtract expected costs, vacancies or collection losses before discounting.
- Watch the duration. A stream whose value sits far in the future is more exposed to changes in rates and to forecasting error.
If there is an upfront price to pay for the stream, the NPV calculator subtracts it and adds IRR and payback. For identical payments, the present value of annuity calculator is faster, and to see where the same amounts end up instead, use the future value of cash flows calculator.
Present values depend on your forecasts and discount rate. They are estimates for analysis, not financial, legal or investment advice.
Frequently asked questions
How do you find the present value of uneven cash flows?
Discount each amount separately and add them: PV = Σ CF_k ÷ (1 + r)^k for amounts at the end of each period. Each term uses the number of periods until that particular payment arrives.
How is this different from NPV?
Present value of cash flows values the stream itself. NPV also subtracts the price you pay to get it. If an income stream has a PV of $58,000 and costs $50,000, its NPV is $8,000.
What is the equivalent level amount?
It is the constant payment, over the same number of periods and at the same rate, that would have the same present value as your uneven stream. It turns a lumpy stream into one comparable number per period.
What does the PV-weighted average timing mean?
It is the Macaulay duration of the stream: the average time until you are paid, weighted by how much each payment is worth today. Streams with longer durations lose more value when interest rates rise.
Can I use monthly cash flows with an annual rate?
Yes. Choose 'Month' as the period. The calculator converts the annual rate to the equivalent monthly rate, (1 + annual)^(1/12) − 1, so twelve months of discounting match one year at the annual rate.