A discount factor converts a future cash flow into its value today. This free discount factor calculator uses the formula DF = 1 / (1 + r)^n, where r is the discount rate per period and n is the number of periods. Enter your rate and periods to get the discount factor, optionally the present value of a future amount, and a period-by-period discount factor table you can use in a DCF or NPV model.
Need the discount factor for a DCF, NPV or present-value calculation? Enter your discount rate and the number of periods above, and get the factor instantly, plus the present value of any future cash flow and a full factor table.
The discount factor is the multiplier that tells you what a rupee received in the future is worth today. It is the backbone of discounted cash flow valuation.
Key takeaways
- Discount factor formula: DF = 1 / (1 + r)n, where r is the rate per period and n is the number of periods.
- Enter a rate and periods to get the factor, and optionally a future amount to get its present value.
- A lower factor means money further in the future is worth less today.
- The period-by-period table gives you a ready discount factor for each year in a DCF model.
Why use this discount factor calculator?
Exact factor
Get the discount factor to six decimals for any rate and period.
Present value too
Enter a future cash flow to see what it is worth today.
Full factor table
A period-by-period table you can drop straight into a DCF or NPV model.
Free and instant
No signup. Recalculate as many scenarios as you like.
How to use it
- Enter the discount rate per period as a percentage (for example 10).
- Enter the number of periods (for example 5 years).
- Optionally enter a future cash flow amount to get its present value.
- Read the discount factor, the present value, and the factor table below.
- Change the rate or periods to compare scenarios instantly.
What is a discount factor?
A discount factor is a number between 0 and 1 that you multiply a future cash flow by to get its present value. Because money today is worth more than the same money later (the time value of money), a cash flow received in the future is discounted back at your required rate of return.
Discount factor formula
The standard formula is:
Discount Factor = 1 / (1 + r)n
Where r is the discount rate per period (as a decimal) and n is the number of periods. For example, at a 10% annual rate for 3 years:
DF = 1 / (1 + 0.10)3 = 1 / 1.331 = 0.7513
So a cash flow of 1,00,000 received in 3 years is worth 1,00,000 x 0.7513 = 75,130 today.
How the discount factor changes with rate and time
| Periods (n) | DF at 5% | DF at 10% | DF at 15% |
|---|---|---|---|
| 1 | 0.9524 | 0.9091 | 0.8696 |
| 3 | 0.8638 | 0.7513 | 0.6575 |
| 5 | 0.7835 | 0.6209 | 0.4972 |
| 10 | 0.6139 | 0.3855 | 0.2472 |
The higher the rate and the further out the cash flow, the smaller the factor, and the less that future money is worth today.
Discount factor vs present value vs NPV
The discount factor is the multiplier. The present value is a single future cash flow multiplied by its factor. Net present value (NPV) is the sum of the present values of all cash flows in a project, minus the initial investment. This tool gives you the factor and the present value, which are the building blocks of an NPV or DCF valuation.
Which discount rate should you use?
The discount rate reflects the return you require, and it varies by context. Businesses often use their weighted average cost of capital (WACC). Investors may use a required rate of return or hurdle rate. For a quick personal calculation, some use an expected market or savings return. The right rate depends on the risk of the cash flows you are discounting.
Popular use cases
- Building a discounted cash flow (DCF) or NPV model.
- Finding the present value of a future payment or receivable.
- Comparing investment options with different time horizons.
- Teaching or learning time value of money concepts.
- Quickly generating a discount factor table for a spreadsheet.
Frequently asked questions
How do you calculate the discount factor?
Use DF = 1 / (1 + r)^n, where r is the discount rate per period as a decimal and n is the number of periods. For 10% over 5 years, DF = 1 / (1.10)^5 = 0.6209. This tool does it instantly and also shows a factor table.
What is the discount factor formula?
Discount Factor = 1 / (1 + r)^n. Multiply a future cash flow by this factor to get its present value today.
What is the difference between discount factor and discount rate?
The discount rate (r) is the percentage return you require per period. The discount factor is the resulting multiplier, 1 / (1 + r)^n, that converts a future amount to present value.
How do I find present value using the discount factor?
Multiply the future cash flow by the discount factor. Present Value = Future Value x DF. Enter a future amount in the tool and it calculates this for you.
Can the discount factor be greater than 1?
For a positive discount rate, no. It is always between 0 and 1 and gets smaller as the rate or number of periods increases. It would only exceed 1 with a negative rate.
What discount rate should I use?
It depends on context and risk. Companies often use their WACC, investors use a required rate of return or hurdle rate. Higher risk cash flows warrant a higher rate.
Does this calculator handle multiple periods?
Yes. It shows the factor for your chosen period and a period-by-period table from period 1 up to n, so you can use each year in a DCF model.
Is this discount factor calculator free?
Yes, completely free with no signup or limits. Calculate as many rate and period combinations as you like.
Want this done for you?
We build fast, SEO-ready websites and run digital marketing for businesses across Noida & Delhi NCR.