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any math wizards out there - I have a PV problem


schirallicpa

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It's not straight forward enough for me to find an online calculator that makes sense. 

Here's the payment schedule: receives 1400 per month for 60 months.  then receives 1540 (10% incr) per month for the next 60 months.  then 1694 per month for next 60 months.  then 1863 for next 60 months.  then 2049 for final 60 months.  Total pay is 512,760.  How do I determine what its worth today?  

I can't get my head around it.  And online calculators use straight interest or constant payments.  I'll pay you if you can do this for me!

 

 

 

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I was just an "expert witness" in a divorce case arguing what the discount rate should be on a long term portfolio. With Excel the math isn't overly difficult but it all comes down to what you want to use as the discount rate. The attorney asked me to do that and then both sides made the leap I was making a bunch of other financial projections off that figure. That was a completely different task that nobody asked me (or paid me) to do.

 

I say the math isn't difficult - I barely passed Financial Planning in college which was basically just a set of these formulas to determine net present value, future value, discount rate and so forth. Excel makes everything easier. I'd enter all 300 payments and do a NPV for each of them and add them up.

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The discount rate of 3.5% is way too low.  Current rates on commercial property are tunning as high as 8.75% and with rising interest rates, I would think the minimum DR would be at least 10%.

Remember the 70's when rates were 20%+.

Abby's chart includes the payments from 2018 and those already paid should not be included the calculation.  

 

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