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Present Value of equal payments of a future value
I have a known future value = $300,000 worth of stock options in year 2012.
A third of this value $100,000 will vest on 12/31/2010. A third of this value $100,000 will vest on 12/31/2011. A third of this value $100,000 will vest on 12/31/2012. Estimated rate of increase per year 5%. How do I find the present value at the end of each year for the vested stock options and have my present value plus interest earned equal my future value. I have tried to use PV tables and get a total of PV amounts plus interest that is greater then my future value. -- Thanks Q |
#2
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Present Value of equal payments of a future value
"Quentin N" wrote:
How do I find the present value at the end of each year for the vested stock options and have my present value plus interest earned equal my future value. I think you are asking: what amount would be invested on 12/31/2009 that permits withdrawals of $100,000 on each of the dates 12/31/2010, 12/31/2011 and 12/31/2012 -- a total of $300,000 -- if the investment appreciates at 5%? That would be PV(5%,3,-100000) -- about $272,324.80. You can check this several ways. If you put the PV formula into A1, then A2 is =A1*(1+5%)-100000. Copy A2 into A3 and A4. Alternatively: A1, PV of 1st $100,000: =PV(5%,1,0,-100000) A2, PV of 2nd $100,000: =PV(5%,2,0,-100000) A3, PV of 3rd $100,000: =PV(5%,3,0,-100000) A4, total PV: =SUM(A1:A3) Note: I chose the sign of the cash flows so that PV is positive. The choice is arbitrary, as long as we are consistent. Use 100000 instead of -100000 if you prefer PV to be negative. ----- original message ------ "Quentin N" wrote: I have a known future value = $300,000 worth of stock options in year 2012. A third of this value $100,000 will vest on 12/31/2010. A third of this value $100,000 will vest on 12/31/2011. A third of this value $100,000 will vest on 12/31/2012. Estimated rate of increase per year 5%. How do I find the present value at the end of each year for the vested stock options and have my present value plus interest earned equal my future value. I have tried to use PV tables and get a total of PV amounts plus interest that is greater then my future value. -- Thanks Q |
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