Future Values Spread or Savings Calculator

The balance your account has grown to at some point in the future is known as the future value of your starting principal. This calculation is used to determine what a sum of money deposited today will be worth at some point in the future based on a specific discount (interest) rate.

Please input your own particular values in the white cells and then click the cells with a green background. Green areas act like the enter button on a calculator.

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YOU MUST INSTALL JAVA SCRIPT ON YOU COMPUTER TO USE THIS CALCULATOR. INTERNET EXPLORER MAY  BLOCK THIS CALCULATOR. IF YOU DON'T SEE THIS CALCULATOR CLICK ALLOW ACTIVE X  ON THE TOOL BAR.

Initial Cash Flow

The initial cash flow should be what the investment has really earned in the year being examined. The growth expectations entered into the form should reflect your judgment on what rate owner earnings will grow in the future. Owner earnings is equivalent to the amount of cash that the investor could take out of the investment. It is defined as "reported earnings plus depreciation, depletion, and amortization, and certain other non-cash charges etc., less the average annual amount of capital expenditures that the investment requires to fully maintain its long-term competitive position and its unit volume". If the investment requires additional working capital to maintain its long-term competitive position and unit volume, the increment should also be included."

Discount Rate

Textbook Definition: The discount rate is calculated by taking a risk-free return like the yield on a 30-year US Treasury Bond, and adding a risk premium to account for the uncertainties involved in holding equities. I like to think of the discount rate as the rate one would expect to earn if one was able to invest at its intrinsic value. For example if you wanted to earn a ten percent return on your investment, you would use ten percent as the discount rate. You would earn a ten percent rate of return if you were able to purchase the investment at its intrinsic value.

Terminal Growth Rate

The rate that you expect the owner earnings will grow at for infinity.

Helpful Hints

Don't discount the future cash flows at 9% or 10%; use the U.S. Treasury rate and try to deal with things about which you can be certain. You can't compensate for risk by using a high discount rate.  In order to calculate intrinsic value, you take those cash flows that you expect to be generated and you discount them back to their present value - in our case, at the long-term Treasury rate. And that discount rate doesn't pay you as high a rate as it needs to. But you can use the resulting present value figure that you get by discounting your cash flows back at the long-term Treasury rate as a common yardstick.

DISCLAIMER: There is NO WARRANTY, expressed or implied, for the accuracy of this information or it's applicability to your financial situation. Please consult your own financial advisor. Interest rates vary and the tax laws change regularly. Please contact us for assistance with your specific concerns.

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