Category Archives: Business Formulas

Formulas to help business leaders and managers determine whether to buy or sell, whether to invest , capitalize or liquidate, whether to praise their directors or to replace them.

Growing the Trust Fund: How much do you need today?

So you want to stash away some money for your children —  a trust fund.  Or perhaps you need to fund a support trust for an elderly family member. If you want the fund to generate the same amount of money every year, … Continue reading

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Lottery Winner’s Dilemma: Lump Sum or Annuity? Calculating the Present Value of an Annuity.

What if you won the lottery tomorrow, and your jackpot was $60,000 a year for 15 years? That would come to $900,000!  But, of course, you would have to wait 15 years to collect it all. What if you could … Continue reading

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Net Present Value — Now let’s figure out if the project is really worth it?

Net present value (NPV) is essentially present value together with a cost-benefit analysis. In other words, by calculating NPV, we can determine whether to accept a certain deal by ascertaining whether we will gain or lose money in the end.  … Continue reading

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Compound it! — The advantages of monthly compounding

If you’re calculating the present value (PV) of a payment to be made in the future, don’t be so hasty as to assume that interest should be calculated on an annual basis. Indeed, it is common to calculate PV using … Continue reading

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Present Value: What if I could get tomorrow’s money today?

Present value is the opposite of future value but can be calculated using the same formula.(For a review of future value, see our earlier post on January 14, 2012). Instead of asking what value present-day money will have in the … Continue reading

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Future Value of an Uneven Cash Flow — What’s it really worth?

You’ve been sued and you’re going to lose the case. Perhaps you should settle the case now and cut your losses. The only problem is that you can’t pay the damages in one lump sum;  you’ll need to pay them … Continue reading

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Present Value of a Perpetuity — So you want to create a trust fund?

          Let’s say you want to put away a certain amount of money today with the guarantee that it will generate a certain amount of interest every year, year after year. How much should you put away? A simple formula … Continue reading

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Future Value with Monthly Compounding — Make more money this way!

If you’re calculating the future value of a present-day dollar amount, use monthly compounding to make yourself more money down the road. If you’re negotiating a deal, and talks have come to a standstill, get your opponent to agree to … Continue reading

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Future Value

What’s the future value of a thousand dollars? This week, the King of Formulas is giving a refresher course on the most basic formulas used in the fields of business, law, insurance and finance. We start today with the calculation for future … Continue reading

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Earnings Per Share

Determine a company’s profitability by calculating EPS: Earnings Per Share Continue reading

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