**The
investment analysis of property often requires the investment
analysis of "partial instruments". That is, parties other
than the freehold owner have interests in the property. For example:**

** *
Lessee and lessors' interests**

** *
Mortgagee and mortgagors' interests.**

**Because
such interests have a time period less than perpetuity they cannot be
valued with the present value of an annuity in perpetuity or the
"capitalization method":**

** MV
= NAI * 100/CR**

** Where:**

** MV
= market value**

** NAI
= net annual income**

** CR
= capitalization rate as a %**

**The
investment analysis of partial interests requires the use of the 4
basic compound formulae. Using computer and financial calculator
notation:**

** *
FV = future value**

** *
PV = present value**

** * FVPMT = future
value of an annuity or payment**

** * PVPMT = present
value of an annuity or payment**

**ALL
compound functions can be calculated knowing 3 of the following input
s (based on financial calculator notation):**

** n
= number of periods**

** I
= interest rate as a % (i = interest rate as a decimal)**

** PMT
= payment or annuity eg rent**

** FV
= future value**

** PV
= present value**

**In
this part we will construct a useful spreadsheet which can be used to
value any compound function.**

**STAGE
1 SET UP MAIN WINDOW**

**Using
excel notation:**

** A1:
FUTURE & PRESENT VALUES OF A LUMP SUM **

** A2:
(underline) **

** E4:
INPUTS **

** E5:
(underline) **

** A8:
PERIODS (n): **

** A10:
INTEREST RATE PER PERIOD %: **

** A12:
PRESENT VALUE (PV): **

** A14:
FUTURE VALUE (FV):**

** A17:ANSWER**

** **

** A19:=IF(E12=0,A12,A14)**

** **

** E8:
35**

** E10:
8**

** E12:0**

** E14:
1000**

** E17:
underline**

** E19:
=IF(E12=0;(1/base)^E8*E14;(base^E8*E12))**

** G8:
BASE**

** G12:
IF NOT NEEDED ENTER “0”**

** G14:
IF NOT NEEDED ENTER “0”**

** H8:
=1+E10/100
should
show 1.08**

**Name
G8 “base:”**

**This
shows a present value answer of $67.63. That is, the present value of
$1000 in 35 years time at 8%pa = $67.63.**

**Enter
a present value of 1000. What would it accumulate to compounding at
7%pa over 35 years?**

**The
answer should be $14 785.34.**

**Save
the spreadsheet as CV1.**

**The
resultant spreadsheet should look like this:**

**Click
on sheet 1 tab and rename “LUMP SUMS”**

**ANNUITIES**

**Retrieve
file CV1. **

**Copy
the active cells of sheet one by highlighting, copy and paste to
sheet 2.**

**Cut
cells A12:A14 and paste at A19.**

**Clear
cells G12 and G14.**

** G12:
ANNUITY OR PERIODIC PAYMENT:**

**Delete
row 14**

** **

**Name
E8:”nn”**

** E10”II”**

** E12:
“PMT1”**

** H8:
“base”**

**Enter:**

** **

** E18:
=(1-1/base1^nn)/(II/100)*PMT1**

**E20:=(base1^nn-1)/(II/100)*PMT1**

**This
will shows that an annuity or periodic payment of $1000 has a present
value of $11654.57 and a future value of $172316.8.**

**Save
file CV2.**

**The
spreadsheet will look like this:**