how to calculate present values

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1、confirmingpagesPART1CHAPTER!!!!!2VALUEHowtoCalculatePresentValues"Acorporation’sshareholderswantmaximumcan.Butinthatcase,thepriceofsimilarbuildingsmayvalueandthemaximumhonestshareprice.Toreachnottellyouwhatthewarehouseisworthunderyourthisgoal,thecompanyneedstoinvestinreal

2、assetsmanagement.Youneedtoknowhowassetvaluesarethatareworthmorethantheycost.Inthischapterwedetermined.takethefirststepstowardunderstandinghowassetsInthefirstsectionofthischapterweworkthroughaarevaluedandcapitalinvestmentsaremade.simplenumericalexample:Shouldyouinvestinane

3、wThereareafewcasesinwhichitisnotthatdifficultofficebuildinginthehopeofsellingitataprofitnexttoestimateassetvalues.Inrealestate,forexample,year?Youshoulddosoifnetpresentvalueispositive,youcanhireaprofessionalappraisertodoitforyou.thatis,ifthenewbuilding’svaluetodayexceedst

4、heSupposeyouownawarehouse.Theoddsarethatinvestmentthatisrequired.Apositivenetpresentyourappraiser’sestimateofitsvaluewillbewithinavalueimpliesthattherateofreturnonyourinvestmentfewpercentofwhatthebuildingwouldactuallysellfor.ishigherthanyouropportunitycostofcapital,thatis

5、,Afterall,thereiscontinuousactivityintherealestatehigherthanyoucouldearnbyinvestinginfinancialmarket,andtheappraiser’sstock-in-tradeisknowledgemarkets.ofthepricesatwhichsimilarpropertieshaverecentlyNextweintroduceshortcutformulasforcalculatingchangedhands.Thustheproblemof

6、valuingrealpresentvalues.Weshowhowtovalueaninvestmentestateissimplifiedbytheexistenceofanactivemarketthatdeliversasteadystreamofcashflowsforeverinwhichallkindsofpropertiesareboughtandsold.1(aperpetuity)andonethatproducesasteadystreamNoformaltheoryofvalueisneeded.Wecantake

7、theforalimitedperiod(anannuity).Wealsolookatmarket’swordforit.investmentsthatproducegrowingcashflows.WeButweneedtogodeeperthanthat.First,itisimportantillustratetheformulasbyapplicationstosomepersonaltoknowhowassetvaluesarereachedinanactivefinancialdecisions.market.Evenify

8、oucantaketheappraiser’swordforit,itTheterminterestratesoundsstraightforwardenough,isimportanttou