net present value of money calcs

[cottie]

hi,
this is my first post on any forum. just thought i would get that out the way

i was wondering if any financial wizards out there could assist me in this project that i am working on.

if i receive r140000 today.
r6300 per month for year 1(same month as i receive the initial r140000)
r7350 per month for year 2
r8400 per month for year 3
r9450 per month for year 4
r10475 per month for year 5 and a final payment of r1260000 at the end of month 60,
what is that income stream at present values?

any help would be greatly appreciated
thanks
cottie
ballito

 

[DJ...]

What is the discount rate? The financing charges?

Or are you not referring to bog standard present value (methinks), not net present value? In which case you need a rate of return figure as well...

 

[cottie]

hi
the discount rate i would asume would be the cost of money at 13% or inflation

 

[cottie]

if you were to receive those payments what would it equate to in money up front

 

[DJ...]

I see. By my calculations it would be R1 151 382.24...

 

[ld13]

hi,
this is my first post on any forum. just thought i would get that out the way

i was wondering if any financial wizards out there could assist me in this project that i am working on.

if i receive r140000 today.
r6300 per month for year 1(same month as i receive the initial r140000)
r7350 per month for year 2
r8400 per month for year 3
r9450 per month for year 4
r10475 per month for year 5 and a final payment of r1260000 at the end of month 60,
what is that income stream at present values?

any help would be greatly appreciated
thanks
cottie
ballito

Right.
Assume we keep all money. Discount rate or interest rate... however you see fit @ I/YR 13%; 12P/YR; END of each month

YR5
FV 1 260 000
PMT 10 175
PV = 1 221 093.75 289

YR4
FV 1 221 093.75 289
PMT 9 450
PV = 1 178 789.33 164

YR3
FV 1 178 789.33 164
PMT 8 400
PV = 1 129 860.18 860

YR2
FV 1 129 860.18 860
PMT 7350
PV = 1 075 109.83 931

YR1
FV 1 075 109.83 931
PMT 6300
PV = 1 015 244.34 054

PV + Upfront
1 075 109.83 931 + 140 000
PV == R 1 155 244.34 054

Let me double check my calculations first...

Edit:
Checked.Do not know why my calculations is a bit off vs DJKs. I used as much decimals as I can - could be that.

Also if we want to get technical. My calculations above assume you get R140 000 NOW, then the normal salary at the end of the month onwards. Another way to work it out is to say you only get the R140 000 and the first salary at the end of month 1, in that case I get R1 153 743.92 834.

 

[cottie]

hi
thank you very much for all your help.
the problem relates to a selling price of 1400000.
your figures were substantially smaller(which is what i thought)
the first few years see financing the balance at 6%,7%8%.... and so on.
your help is greatly appreciated.
i think i could get into enjoying these forums- who needs a financial adviser when you are around.

 

[guest2013-1]

what are we trying to work out anyway?

 

[cottie]

i am a property developer
we are looking at way in which to sell houses
the problem is due to the nca people aren't getting loans. this is a way we are looking at taking a rent to own angle for mr buyer.
give us the 10% dep now. we then finance you at 6% yr 1 7% yr 2 8% yr 3 9% yr4 10% yr 5.
up front you sign an agreement with us whereby you undertake to get finance for the balance . in month 60 we therefore get the final 90% balance.
by then there might not be the current economic conditions and there will definitely be enough loan to value in the property for you to get finance. in a nutshell.

 

[DJ...]

the problem relates to a selling price of 1400000.

So essentially you're sitting with a situation that will reduce the value of the company. The seller is asking for roughly a 15% to 20% premium on the company's NPV which doesn't sound like a sound investment, unless you can increase profit margins by more than that figure or the turnover over the same time period. However the calculation assumes no outward cashflows as well...