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Periodic Constant Payments Calculator:
Periodic Constant Payments
In timberland investment analysis, certain cost items such as annual
management costs and property taxes are usually treated as periodic constant
payments for simplifying the analysis. Periodic constant payments
are payments that are constant over time at a fixed time interval. The
following Future Value Calculator can be used to calculate the total future
value of an initial investment plus periodic constant payments at a constant
interest rate.
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The formula for the future value of periodic constant payments is: |
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FV = P(1+r)n+AP((1 + r)n-1)/r
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| where FV is the future value,
P is the initial capital,
AP is the periodic constant payment, r is interest rate and n is the number of years
since first payment.
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An example: calculate the future value of the total costs per acre
for establishing and managing a new plantation. Assuming that the total cost for
establishing the new plantation (reforestation costs), including
site preparation and planting is $200 per acre. All reforestation costs are
assumed to occur in the first year of the plantation. The annual management costs
and property taxes are $10
per acre per year for the duration of the plantation. The plantation will be clear-cut at year 25. With a constant interest
rate of 5%, the above calculator gives a total future value of $1154.54.
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