Planners, Present Value

Use the “Present Value” planner to resolve the following type of questions. Given a 5% inflation rate, which is worth the most…

• £50,000 lump sum in 20 years time, or
• £60,000 paid as a regular income of £6,000 per year for 10 years starting in 20 years time?

The “Value” planner shows that the £50,000 lump sum in 20 years is equivalent to £18,844.47 right now, whereas the £60,000 spread as income over 10 years has a present value of only £17,461.46, as shown below. So the present value of the £50,000 is greater than the £60,000.

The following notes should be read in associate with those in “Planners, Starting & Warning”, “Planners, Default or Standard Values” and “Planners, Saving, Re-finding & Deleting”.

First select the type of calculation you require by clicking the appropriate button (e.g. “Regular Future Income”).

Finally enter the figures on the right hand side…

• The “Monthly Income” is the amount to be received (e.g. £6,000 per year = £500 per month)
• The “Incrementing” value is the amount by which the received sum will increase each year, to allow for inflation (e.g. zero)
• The “Inflation rate” is the rate at which the received sum will diminish due to inflation (e.g. 5%)
• The “Years before income” is the years before any income is received (e.g. 20 years)
• The “Years of income” is for how many years the income will be received, once it has started (e.g. 10 years)

Click the “Calculate” button to find the result.

Saving, Deleting & Printing

When you’re satisfied with it you can save the plan, then subsequently re-find it, all as described above in the section on “Planners, Saving, Re-finding & Deleting”.

To print the completed plan…

• Click “File”
• Click “Print”
• Click “Plan”