2 plus 2 is still 4 no matter what you do or don't do for a living.
I've had to put together many deals involving the present value of
dollars received later (that's me sticking to the law as the other
Dan said - he just forgot to inquire what type of law).
It doesn't make a bit of difference what either of us do or how many
times we've done it.
2 plus 2 still has to equal 4.
You are not going to get an investor to hand you 8.3 million for the
right to (maybe) receive 13.3 million over 10 years, when he can
safely make the same money in a CD in the same period of time with
no risk and no administration costs.
In real world terms, Asbury Park would have to ask for a great deal
less than 8.3 million.
--- In AsburyPark@yahoogroups.com, "dsher4" <[EMAIL PROTECTED]> wrote:
>
> OK hold on - let me explain
>
> one example is 8.3 million tied up for 10 years. your 5% example.
> you get 5% on 8.3 each year or $415,000
>
> The example i gave is 8.3 million up front like your example, but
> you receive 1.34 million each year that you can then re-invest in
> something else.
>
> SO, it is a better stream of cash flows
>
> Trust me on this one, i do this for a living
>
>
>
>
> --- In AsburyPark@yahoogroups.com, "justifiedright"
> <justifiedright@> wrote:
> >
> > That's right - which is why I don't think the posts have been
> > correct in calling the deal as presented a 10% rate of return to
> the
> > investor.
> >
> >
> >
> >
> > --- In AsburyPark@yahoogroups.com, "dfsavgny" <dfsavgny@> wrote:
> > >
> > > --- In AsburyPark@yahoogroups.com, "justifiedright"
> > > <justifiedright@> wrote:
> > > >
> > > > So if I put 8.3 million in a safe investment vehicle with 5%
> > > > compounded annually, how much would I have at the end of 10
> > years?
> > > >
> > >
> > > $ amount X (1 + i)^n
> > >
> > > i = rate of interest
> > > n = compounding periods
> > >
> > > Let's you find the compound interest factor
> > >
> > > The answer using your numbers
> > >
> > > $8.3M X (1 +5%)^10
> > > $8.3M X 1.628895
> > >
> > > $13.519825M
> > >
> > > Go in reverse. What is the present value of $13.519825 to be
> > received
> > > in 10 years assuming a 5% interest rate.
> > >
> > > Present value factor is reciprocal 1/(1+i)^n
> > >
> > > $13.519825M X 1/(1+5%)^10
> > > $13.519825M X .613913 = $8.3M
> > >
> >
>
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