5 ms·
8% interest on present cash is high. Anyhow, the easy rule of thumb for converting between income streams and present value is simply "multiply by 20". In roug
by ThrustVectoring 12y ago
8% interest on present cash is high.
Anyhow, the easy rule of thumb for converting between income streams and present value is simply "multiply by 20". In rough numbers, it $1/year is worth $20.
- ntaso 12y agoHow do you come up with the factor of 20? On a smaller scape, if you try to buy a website or an online-business (say, on Flippa), oftentimes the sales price is around 2-3x yearly income. For my own business, I'd love to see a factor of 20, but I can't see how anyone would offer that much money.
- abeld 12y agoConsider the difference between income and profit. For the present value calculation, you would need to use the profit, not the revenue. (After all, once you take the payout, you don't have any expenses.)
- Guvante 12y agoBoth 8% and 5% are fairly standard. You chose one, I chose the other. The much much bigger problem is how many years?