This calculator will help you determine if you should offer or accept a payment plan
or
if you
should push for a lump sum payment. Once you complete the form, you will get a
present
value of
the cash flow. All you have to do is compare the present value to the other option
of a
lump
sum, to know which is truly the more valuable option. Obviously your outlook will
change
depending whether you are the buyer or seller. If you would like, we'd be happy to
teach
you
more about this. Just Contact Us and
ask.
Summary
Payment Options
Payments
Real Time Summary
Discount Rate
This is your cost of capital. If you are borrowing money, it's the interest rate you
will
be
paying.
If you are using cash in the bank, it's the minimum return that you would expect on
any
other
investment. In other words, if you think you could earn 10% playing the stock market
and
you
will be
using your own cash, just enter 10%.
The reason it's called a discount rate, rather than an interest rate, is because it
will
discount
the
future cash flows to help you determine the eventual net present value. As an
example,
$10,000
earned next year at a 10% discount rate is only $9000 today. $10,000 earned 2 years
from
now is
worth only $8100 today because it’s discounted twice at 10%. That's the entire point
of
this
exercise. What is the asset worth in today's dollars?
We feel that this is the most important element to focus on. In its most basic sense,
the
risk
factor
just adds onto the discount rate. So, if you have a 20% risk factor and a discount
rate
of 10%, you have a combined discounted cash flow of 30%.
Most financial analysis formulas don't include a risk factor but we feel it's
imperative
here.
There
are inherent risks in purchasing a website. If you can accurately identify those
risks
and the
percentage chance that everything could go horribly wrong, you'll have a competitive
advantage.
To
put another way, he who most accurately identifies the risk, wins.
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