I’ve been working on a spreadsheet to help evaluate IP deals.
I’m a visual sort of guy and struggle to deal with Net Present Value and Internal Rate of Return as abstractions, so have represented them graphically.
I’d be interested in any feedback regarding the usefulness of this graphical simulator.
At the moment, the simulator cannot reflect realistic cyclic changes in rates and CPI adn growth, but I may develop that.
BTW, the input worksheet looks complicated, and I’ll clean that up in time.
Mooloolaba, QldvoigtstrMember@voigtstrJoin Date: 2005Post Count: 176RhysQLDParticipant@rhysqldJoin Date: 2004Post Count: 53
I look forward to having a play with it.grossrealisationMember@grossrealisationJoin Date: 2005Post Count: 1,031
not had a play yet but will have a look and send you my modified sheet
here to help
Any input appreciated.
I am still editing for errors. Though I don’t expect to find too many more. Tonight I revised calculation of NPV. And have cross checked and it seems to be right now.
Some of the stamp duty values are out of date for some of the states. NSW and Qld are ok though.
There’s a few accounting issues I could do with advice on. i.e. the consistent application of inflation to future values, esp when used in IRR and NPV calcs. And a realistic choice for the discount rate in NPV, that considers the illiquid nature of property, future risk of negative events, and inflation’s effect on future dollar value.
I have seen one formula for NPV discount rate:
Discount Rate = Cost of Capital.
The formula for the (Nominal) Discount Rate
= (1 + Inflation Rate) * (1 + Real Discount Rate) – 1
Mooloolaba, Qldpete152Member@pete152Join Date: 2004Post Count: 15
That is a beauty Bruce!! Thanks,