The present value of a future cash flow is the nominal amount of money to change hands at some future date, discounted to account for the time value of money. A given amount of money is always more valuable sooner than later since this enables one to take advantage of investment opportunities. Because of this present values are smaller than corresponding future values

Present value calculates the value of money you will receive in the future from the perspective of right now

Example 1. suppose you know that you will need $10,000 in five years and you want to put a chunk of money away and let it earn interest to meet that goal. You know you can get a reliable 4% return. How much money do you have to put away now for it to grow to $10,000 in five years?

Example 2.you are looking to buy a new car and have decided that you can afford $290 per month payment for the next five years. Knowing the interest rate available on auto loans, you can use present value to determine the amount you will be able to borrow.