Copyright: Tierra Time & Cash Flow Ver 1.0


Contents
 Tierra Time Value & Cash Flow Help

Overview	Time Value Modeler

Cash flow Modeler

Six Functions of a Dollar	Future Value of One

Present Value of One

Future Value of One Per Period

Present Value of One Per Period

Direct Reduction Loan Factor

Sinking Fund Factor

Other Functions	PV One Per period (Amt Change)

PV One Per Period (Ratio Change)

PV One PP Stabilized (Amt Change)

PV One PP Stabilized (Ratio Change)

Cash Flow Modeler	Net Present Value

Internal Rate of Return

Loan Balance Calculator

Product Information	About

Order Information


 Time Value Modeler Overview

The time value modeler offers the six functions of a dollar which include Future Value of One, Present Value of One, Future Value of One Per Period, Present Value of One Per Period, Direct Reduction Loan Factor and the Sinking Fund Factor. In addition, four derived functions are included. These are the Present Value of One Per Period (growing or declining at a constant amount), Present Value of One Per Period (growing or declining at a constant ratio or percent), Present Value of One Per Period Stabilized (growing or declining at a constant amount) and the Present Value of One Per Period Stabilized (growing or declining at a constant ratio or percent).

The user may use the pre-defined principal, interest, years, amount and percent change items from the drop-down input boxes or type in the specific items manually. The program allows for differing compound or discount time intervals including daily (continuous), monthly, quarterly, semi-annual or annual periods. In addition, inter-period payments may be included by selecting the option Inter-Period Payments check box and selecting the appropriate additional periods from the drop-down input box. This feature is useful if a loan has an amortization period extending 30 years (360 payments) and say seven months. The Calculate, Clear and Exit command buttons are self explanatory.

Any one of the function label captions can be highlighted for clarity by clicking on it with the mouse. The highlight color is red. To revert the label caption color back to black,  click on the label again. Multiple selections are supported.

Most calculations require end of period payments. The default payment is end of period. However, the program allows for the beginning of period calculations by selecting the appropriate option button. The user can select between the Amount or the Constant factor. The Amount calculation includes the Constant factor multiplied by the  Amount.

The Menu System has the following menu groupings: data, setup and help. The data menu group duplicates already discussed command button options.

The setup menu option displays the Setup dialog. All inputs including principal, interest, years, amount and percent change can all be defaulted along with the time period and output alignment. When inputting currency figures such as amount and amount change, do not type dollar signs or commas. The program will auto format these numbers. In addition, when inputting percentages, place the decimal equivalent into the input box and the program will auto format it to a percentage. For instance, if the default interest rate is 10%, then input .10. The changes take instant affect once the dialog is closed and remain in affect until changed.

When selecting the daily payment schedule option, the interest compounds or discounts on a continuous basis including any inter-period payments included. In addition, if using one of the functions that add additional amounts on a periodic basis, these are added either on a 360 or 365 day basis as selected in the Setup dialog. Furthermore, It must be pointed out that daily compounding and discounting are only common for the Future Value of One, and Present Value of One calculations. The remainder calculations are included only for completeness.

The help menu group allows for various avenues of help access though the Context and Search commands. The Context command displays the main program topics menu. The Search command option displays a word search dialog for help access. The How to Use Help menu command displays information on how to use the windows help system. The Initialization File menu command loads the program initialization file into the windows Notepad application for editing. This feature is only for experienced windows users. Inappropriate input into this file can cause the system to crash. If this should happen, remove the Initialization file and reset the system defaults when the program begins. The About command option displays information regarding the author and copyright information.


 Cash Flow Modeler Overview

The cash flow modeler offers the Net Present Value, Internal Rate of Return functions and access to the Loan Balance Calculator.

The program allows unlimited cash flow input of differing or identical cash flows. The Add command button places a single entry from the Cash Flow input box into the Grid. The Delete command button removes the last cash flow from the Grid. The Clear command button removes all entries. To edit an individual number entry already in the Grid, move the mouse to the entry in the Grid and click the mouse over it. The entry will move into the Cash Flow input box. Make the necessary changes and then press the Add command button. The edited number will be returned to the original place before editing took place. The number of cash flows used in the analysis is dependent on the amount of memory available on the computer.

The Negative command button allows for negative cash flows in the analysis. To use this feature, press the Negative command button and the payment becomes negative in the Cash Flow input box. Press the Add command button and this negative payment is transferred to the Grid. Remember to press the Negative command button a second time to remove the negative cash flow sign from the Cash Flow input box .

The Multi-Add function allows for compound cash flow entry. To use this function, place the payment and the number of payments in the appropriate input boxes and press the Multi-add command button. These cash flows are appended to the end of the Grid data. This process can go on until all cash flow sequences have been entered. For instance, If a cash flow stream consists of 300 payments of 150 at $550 and 150 at $700, it would be impractical and time consuming to input each number separately. The multi-add function makes this input a snap.

The Menu System has the following menu groupings file, edit, and help. The File menu group has the Open and Save File options. These complimentary options allow for the saving and opening of cash flow inputs. In order to save a cash flow stream, it must be first calculated. The remainder of the options duplicate already discussed command button options. The Edit menu group allows the user to copy, cut and paste already existing cash flows. This feature should not be used to input new cash flows. The Edit commands do not increment or decrement the internal cash flow counter and will lead to erroneous results. The Add or Multi-Add command button should be used to add new cash flows and the Delete or Clear command button should be used to remove cash flows. The Copy menu command copies selected cash flows to the clipboard and leaves the original cash flows in place. The Cut menu command removes the cash flows and places it in the windows clipboard. The Paste menu command places the current information in the clipboard into the selected rows in the input grid.

The Help menu group allows for various avenues of help access though the Context and Search commands. The Context menu command displays the main program topics menu. The Search menu option displays the Word Search dialog for help access. The How to Use Help menu command displays information on how to use a windows help system. The About menu command option displays information regarding the author and copyright information.


 Future Value of One

The future value of one represents what a single investment or deposit will be worth in the future assuming it is compounded at an effective interest rate.

Example No.1:

What will $10,000 be worth in ten years assuming a 10% interest rate compounded annually?

$10,000 X 2.593742 = $25,937.42

Example No.2:

What will $10,000 be worth in ten years assuming a 10% interest rate compounded daily?

$10,000 X 2.718282 = $27,182.82

Daily compounding is common for many savings and investment accounts and results in a higher overall return compared to other compounding periods such a monthly quarterly, semi-annual and annual due to the greater number of compounding periods. The sister function Future Value of One Per Period. differs in that it represents periodic payments over a period of time compounded at a specific rate.


 Present Value of One

The present value of one represents what a single investment or deposit is worth today assuming it is discounted at an effective interest rate.

Example No.1:

What is the present value of $10,000 to be received in ten years assuming a 10% annual discount rate?

$10,000 X .385543 = $3,855.43

Example No.2:

What is the present value of $10,000 to be received in ten years assuming a 10% monthly discount rate?

$10,000 X .369407 = $3,694.07

Monthly discounting returns a lower present value than does annual discounting due to the greater number discounting periods. This function is widely used for cash flow discounting when one payment is in question. The sister function Present Value of One Per Period. differs in that it represents periodic payments over a period of time discounted at a specific rate.


 Future Value of One Per Period

The future value of one per period represents what a series of level investments or deposits will grow to over a period of time assuming it is compounded at an effective interest rate.

Example No.1:

What will $1,000 per year be worth in 10 years assuming a 10% interest rate compounded annually?

$1,000 X 15.937425 = $15,937.43

Example No.2:

What will $1,000 per month be worth in 10 years assuming a 10% interest rate compounded monthly?

$1,000 X 204.84498 = $204,844.98


 Present Value of One Per Period

The present value of one per period represents what a series of level investment or deposits is worth today assuming it is discounted as an effective interest rate.

Example No.1:

What is the present value of $1,000 per year to be received over ten years assuming a 10% discount rate?

$1,000 X 6.144567 = $6,144.57

Example No.2:

What is the present value of $1,000 per month to be received over ten years assuming a 10% discount rate?

$1,000 X 75.671163 = $75,671.16


 Direct Loan Reduction Factor

The direct loan reduction factor is commonly known as the mortgage constant or loan repayment factor. It is the most common function of the dollar and deals with loan repayment.

Example No.1:

What will be the monthly payments for a $10,000 loan amortized over 5 years at 10 percent interest compounded monthly?

$10,000 X .0132515 = $132.52

Example No.2:

What will be the monthly payments for a $10,000 loan amortized over 5 years and 6 months at 10 percent interest compounded monthly?

$10,000 X .012849 = $128.49

Example No.3:

What will be the monthly payments for a $10,000 loan amortized over 5 years at 10 percent interest compounded annually?

$10,000 X .162745 = $1,627.45

If the annual payment of $1,627.45 is divided by 12, it indicates $135.62 per month whereas the monthly payment for the same period is $132.52. the reason that the two payments are different is that the first is amortized on a monthly basis whereas the latter is amortized on an annual basis. The user needs to be aware that division over time with these functions does not lead to identical results. However, if the loan is amortized on an annual basis and paid monthly, then the division discussed would be appropriate.


 Sinking Fund Factor

the sinking fund factor is also known as the accumulation factor. This function indicated what periodic payment is need to accumulate to a given amount over a certain period of time

Example No.1:

Assuming a 10% interest rate, what annual periodic payment is required to accumulate $10,000 in 10 years compounded annually?

$10,000 X .062745 = $627.45

Example No.2:

Assuming a 10% interest rate, what annual periodic payment is required to accumulate $10,000 in 10 years compounded monthly?

$10,000 X .004882 = $48.82

This function is used in real estate for reserve replacement and the calculation of depreciation or appreciation in capitalization techniques and in investment planning for future required income needs for such varied items as retirement and college education cost.


Present Value of One Per Period (CA)
 Present Value of One Per Period (Amt Change)

The present value of one per period growing or declining at a constant amount represents what a series of level investment or deposits is worth today growing at a straight-line constant amount assuming it is discounted as an effective interest rate.

Example No.1:

What is the present value of 10 annual payments of  $1,000 growing at $100.00 per year assuming a 10% discount rate?

$1,000 X 8.433701 = $8,433.70

Example No.2:

What is the present value of 120 monthly payments of $1,000 growing at $100.00 per month assuming a 10% discount rate?

$1,000 X 107.013490  = $107,013.49


Present Value of One Per Period (CR)
 Present Value of One Per Period (Ratio Change)

The present value of one per period growing or declining at a constant ratio represents what a series of level investment or deposits is worth today growing at an exponential or non-linear amount assuming it is discounted as an effective interest rate.

Example No.1:

What is the present value of 10 annual payments of  $1,000 growing at 10% per year assuming a 10% discount rate?

$1,000 X 9.090909 = $9,090.91

Example No.2:

What is the present value of 120 monthly payments of $1,000 growing at 10% per month assuming a 10% discount rate?

$1,000 X 119.008264  = $119,008.26


Present Value of One Per Period Stabilized (CA)
 Present Value of One PP Stabilized (Amt Change)

The present value of one per period stabilized growing or declining at a constant amount is the stable equivalent of the PV One Per period (Amt Change). This figure represents the straight line J factor. The straight line J factor is not the same as the Ellwood J factor. The latter presumes a constant dollar amount similar to a sinking fund accumulation whereas the former grows at a constant amount. This figure is found by multiplying the first period income by the factor.

Example No.1:

What is the present value stable equivalent value of 10 annual payments of $1,000 growing at $100.00 per year assuming a 10% discount rate?

$1,000 X 1.372546 = $1,372.55

Example No.2:

What is the present value stable equivalent of 120 monthly payments of $1,000 growing at $100.00 per month assuming a 10% discount rate?

$1,000 X 1.414191 = $1,414.19

This function is typically used with capitalization techniques to stabilize NOI to a level equivalent.


Present Value of One Per Period Stabilized (CR)
 Present Value of One PP Stabilized (Ratio Change)

The present value of one per period stabilized growing or declining at a constant ratio is the stable equivalent of the PV One Per period (Ratio Change). This figure represents the K factor. This figure is found by multiplying the first period income by the factor.

Example No.1:

What is the present value stable equivalent value of 10 annual payments of  $1,000 growing at 10% per year assuming a 10% discount rate?

$1,000 X 1.479504 = $1,479.50

Example No.2:

What is the present value stable equivalent of 120 monthly payments of $1,000 growing at 10% per month assuming a 10% discount rate?

$1,000 X 1.572703 = $1,572.70

This function is typically used with capitalization techniques to stabilize NOI to a level equivalent.


 Net Present Value

The net present value represents what a series of level or changing investments or deposits is worth today discounted as an effective interest rate.

The NPV drop combo box indicates the rate of discount applied to the income stream. For this function, the cash flows can be annual, semi-annual, quarterly, or monthly.

If the initial investment for net present value option button is not selected, payments start at the end of the first period and may be negative or positive from thereon. If this option button is selected, cash flow zero is always negative and represents the initial investment. The program automatically places a negative number in time zero.

If an unknown balloon or reversion before complete amortization is required, the Loan Balance Calculator can be accessed by selecting the Load Balance command button.

Example No.1:

What is the net present value of 5 annual payments consisting of $1,000, $2,000, $3,000, $4,000 and $5,000 discounted at a 10%?

NPV = $10,652.59

What is the net present value of 18 monthly payments of $500 for 6 months, $1,000 for the next 6 months and $400 for the last six months discounted at 10%?

NPV = $10,570.63

The function is extremely flexible and can handle any combination of payment stream that falls on a fixed period basis whether it be monthly, quarterly, semiannual or annual. The payment period dictates the discounting period. For instance, if the payment is made on a monthly basis, then the payments are discounted on a monthly basis.


 Internal Rate of Return

The internal rate of return represents the internal interest rate that an investment returns. For this function, the cash flows can be annual, semi-annual, quarterly, or monthly. In addition, cash flow zero is always negative and would represent the initial investment. The program automatically places a negative number in time zero.

Example No.1:

What is the internal rate of return of a $10,000 initial investment and 5 subsequent  annual payments consisting of $1,000, $2,000, $3,000, $4,000 and $5,000?

IRR = 12.01%

What is the internal rate of return of a $10,000 initial investment and 18 subsequent monthly payments of $500 for 6 months, $1,000 for the next 6 months and $400 for the last six months?

IRR = 17.52%

The function is extremely flexible and can handle any combination of payment stream that falls on a fixed basis whether it be monthly, quarterly, semiannual or annual.  longer payment streams can take some time because the program iterates many thousands of times to ascertain the correct answer. The Calculate command button is not enabled during this time. The payment period dictates the discounting period. For instance, if the payment is made on a monthly basis, then the payments are discounted on a monthly basis. The program will not calculate negative IRRs. In addition, the function looses its relevance as an investment gauge if some of the cash flows are negative. In fact, analysis has shown that for each negative cash flow, there is a an alternative Internal rate of return. Therefore, If there are three negative cash flows, then the Internal rate of return will have three IRRs.


 Loan Balance Calculator

The loan balance calculator is generally broken down into two parts. The loan information section includes the loan amount, interest rate, full term to amortization and any inter-period or non standard periods. This feature is useful if a loan has an amortization period extending 30 years (360 payments) and say seven months or has an extra quarterly payment..

The period until balloon section is the number of payments that will expire until the balloon or reversion is due. Non-standard payments can be accessed by use of the Inter-Period input  box.

The payment schedule option group allows for differing compounding periods. It will initially display the selected option from the Cash Flow Modeler. For instance, if the loan in question is 30 years, it could be compounded on a monthly or annual basis. It is typical for loans today to be amortized and paid on a monthly basis.

The program works in concert with the Cash Flow Modeler allowing the user to input the cash flow stream into the Modeler and then select the Loan Balance command button. Once the balance is found, the user will be prompted by the program to transfer the figure to the Cash Flow Modeler. The user may or may not due this. If the user selects to proceed, the loan balance is appended and added to the last payment inputted as is typical for a balloon style payments. If the Cash Flow Modeler has no inputs, the user will not be prompted to transfer the figure.


 About

Comments, suggestions and ideas are always welcome. If any of the suggestions or ideas are included in this product, a complimentary program disk with included feature(s) will be immediately sent to suggesting party free of charge.

Both the time value modeler and the cash flow modeler are distributed as shareware and are generally parts of or complimentary to larger more encompassing programs developed by Tierra Software Systems. This software is not free and requires the user, after a 30 day trial period, to register the product for a modest price. The current price for the Time Value Modeler is $9.95 while the Cash Flow Modeler is $14.95 or $19.95 for both. This price entitles the user to the most recent version of each program, product support and information on existing and new product offerings. Remember that only by your continued support can we make these tools available to you. These financial tools may be distributed to your family, friends, classmates and business associates. This product was copyrighted in 1994 under United States and International copyright treaties.

Tierra Software Systems has several other non-shareware products available in the real estate appraisal and analysis fields including the windows land extractor ($59.95), land extractor pro ($79.95) and the windows discounted cash flow analyst ($89.95) for income producing real property analysis.

Major Credit cards are accepted for all products but checks are preferred for shareware products offerings. An order form can be found under Order Form. To inquire into other products, Call 1 (800) 520-9579 or mail check or inquiry to:

Tierra Software Systems

Steven A. Plotkin, Developer

P.O. Box 30103

 Seattle, Wa 98103


 Order Form

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