Present Value

[austenr]

OK I am trying to use this function and am not sure I am getting the correct answer. My scenerio:

I have an investment of 20,000,000.00. I need to know if it is paid out to the individual in 20 equal installments, what is the difference between drawing it on the first part of the year verses the last part of the year. I have tried two different formulas ans cannot decide which is correct. They are:

=PV(5%,20,1000000,0,0) for the beginning of the year

and =PV(5%,20,1000000,0,1) for the end of the year

the rate is 5% per year

my answer was 12,462,210.34 for the beginning of the year and
13,085,320.86 for the end of the year

just does not sound right to me. Can someone double check it for me? Thanks

[TonyJollans]

I'm not quite sure I follow what you want but those amounts are the investment(s) required to pay 1,000,000 per annum for 20 years subject to drawing at the beginning or end of the year. The calculation is correct but I'm not sure it answers the problem posed at the beginning.

[mdmackillop]

Hi Austen,
I don't understand these formulas well enough to trust them. Here';s a check method, it may not be 100% but you should see what is happening. Regarding end/beginning of year, when is first "beginning" withdrawal, immediately after the deposit? Doesn't seem sensible to do that, but I'm sure there's a CPA around somewhere to keep you right!
Regards
Malcolm

[austenr]

Thanks everyone. I had it right but then got to thinking it didn't look right because the amount I was getting looked to high. So I tried an alternate method. That seemed too low. So going back to the original formula I got someone here at work to verify it (CPA). So I guess it solved. Gee, wish I had that much to be able to draw one million dollars a year for 20 years. :devil: