Använd Nettonuvärde, nuvärde, slutvärde, belopp, ränta I excel program. Useful tools in the Excel program to calculate NPV, PV, FV, PMT, RATE, etc Praktisk.

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Presentation transcript:

Använd Nettonuvärde, nuvärde, slutvärde, belopp, ränta I excel program. Useful tools in the Excel program to calculate NPV, PV, FV, PMT, RATE, etc Praktisk Hjälp med excel program

Annuity example: the winning lottery ticket Ex: You won a lottery that promises to pay 50,000 kr every month for 25 years from next month onwards. Assuming the market interest rate is 2%. Question: Calculating the present value of the winning lottery. Period of payment (T)=25*12=300 Use the PV function in the excel spreadsheet =PV(0,02;300;50000;;0) = ,11 kr The present value of the lottery is 2,49 million. ”-” means the cash flow over the 25 years is considered as an investment return and the present value is considered as ground investment, which is a ”cash outflow”.

The present value is about 2,49 million$ The lottery of per month in 25 year. Use PV function on Excel program: note that the payment has to be constant for PV function.

What if the market interest rate is 10%? The value has just dropped from 2,49m $ to 0,5 million. Because the discount rate now is 0,10.

Perpetuities & Annuities Example - Future Value of annual payments You plan to save $4,000 every year for 20 years and then retire. Given a 10% rate of interest, what will be the FV of your retirement account?

Answer to the previous question: Step 1: calculate the PV, step 2: calculate the FV. On the spreadsheet you use the NPV function or the PV function: NPV= 33495,68$ Get future value of it: PV (1+0,1)^20 Use FV function, you get FV= $

Or use PV function Formula Result = 34054,25, i.e. the present value of a stream of cash flow.

The future value of the annuity is

You have kr that you need to generate a monthly payment of 8732 kr for a period of 12 months, what is the interest rate generated by the annuity? The answer is 1% (monthly).

Put it differently, if the monthly interest rate is 2% what will be the monthly payment you get from the capital amount ? Use Payment function: PMT The answer is 9455,95 kr. You will find out the higher the rate, the higher the generated payment!

Manhattan Island Sale Peter Minuit bought Manhattan Island for $24 in Was this a good deal? To answer, determine $24 is worth in the year 2008, compounded at 8%. FYI - The value of Manhattan Island land is well below this figure.

Use FV function to get the value of 24 dollars saved at 8% interest over 382 years. The result is 140,633 trillion (1,406E+14)