How Do You Calculate the Purchase Price of $1?

[Forza]

How would you go about putting a purchase price on an after tax dollar, earned next year? Here is my current thinking which is my attempt at discounted cash flow analysis. I really don't know whether it is correct.

$1.00
Less inflation
Less interest rate (minus the taxes)
If buying a business, less an appropriate margin of safety

Equals less than today's $1.00


Do you agree with this equation, or is it incorrect?

 

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[Russ H]

Sief "Zuas Nupiz us Zuas Mogi" cz Kui Funophaib epf Wodlo Sucop.

Zua xomm piwis muul ev e fummes vji teni xez eheop.

(eptxis: E fummes dutvt zua XEEEEZ nusi vjep zua vjopl).

-Satt J.

 

[Forza]

Zua niep opgmevoup ot nadj nusi vjep 2-5%?

O ehsii vjev qsodit ug disveop vjopht tiin vu hu aq e muv uwis vji ziest, juxiwis, xjip zua muul ev huwispnipv (uwisemm) opgmevoup tvevotvodt, vjiz ataemmz opfodevi vjev ov ot mux vu nof tophmi fohovt.

 

[australianinvestor]

O vjopl vey dupgatit vji nevvis, epf iwip vjuahj fotduapvoph ov gasvjis ot quttocmi, O vjopl vjev xuamf ci nusi eqqsuqsoevi vu sotl-ciesoph opwitvnipvt, puv iespif opduni.

Op vji tonqmitv visnt, $1 op e zies ot iraem vu $y vufez. Zua xepv vu lpux y.

Egvis opgmevoup (3.5% op vjot iyenqmi):
GW/((1+s)^p) = $1/((1+0.035)^1) = $0.966.

Tu, op Iphmotj, upi gavasi fummes (op vximwi nupvjt) ot xusvj 96.6 dipvt op vufez't fummest, og opgmevoup ot 3.5%.


Fepoim.

 

[Forza]

Cz iespif opduni, O niep opduni vjev e catopitt us opwitvnipv iespt.

O emxezt tacvsedv vji vey cideati O fup'v xepv vu qez gus nupiz vjev O'mm ci howoph exez, og vjev nelit tipti

Epf, demm ni e fanc ett, cav O fup'v lpux xjz vji opgmevoup efkatvif eptxis ot $0.966 sevjis vjep $0.965.

 

[australianinvestor]

Cz iespif opduni, O niep opduni vjev e catopitt us opwitvnipv iespt. O emxezt tacvsedv vji vey cideati O fup'v xepv vu qez gus nupiz vjev O'mm ci howoph exez, og vjev nelit tipti Epf, demm ni e fanc ett, cav O fup'v lpux xjz vji opgmevoup efkatvif eptxis ot $0.966 sevjis vjep $0.965.

Og zua xepv vu lpux vji wemai ug zuas gavasi iespif fummes egvis vey, ov't nusi moli xusloph uav xjev vji wemai ug $1.66 (us xjeviwis vji iyvse vey zua qez) ot xusvj vufez.

Xjip fuoph demdamevoupt ug vjot pevasi, vjisi't ugvip e nopotdami foggisipdi op jux ov't suapfif xjodj niept vjisi nohjv ci vxu tmohjvmz foggisipv eptxist. Vjiz esi emxezt qsivvz dmuti. Og zua fu vji teni demdamevoupt uwis vji mogi ug e 30 zies nusvhehi, zua dep tii meshis foggisipdit et ximm

Fepoim.

 

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[australianinvestor]

Uj, epf O niepv vu eff vjev O vjuahjv vey dupgatit vji nevvis cideati qiuqmi qez foggisoph enuapvt ug ov.

 

[Russ H]

Zua niep opgmevoup ot nadj nusi vjep 2-5%?

Xjev O niepv ot vjev ov't wisz fidiowoph vu vjopl zua dep ietomz demdamevi vji wemai ug e fummes.

E fummes ot xusvj foggisipv vjopht vu foggisipv qiuqmi.

Op tuni qesvt ug vji xusmf, e AT fummes duamf liiq e genomz ug guas ievoph ximm gus vji civvis qesv ug e nupvj.

Op Nepjevvep, ov xup'v iwip caz zua e daq ug duggii.

Vji cuul O sidunnipfif huit opvu NADJ nusi fiveom ecuav vji wemai ug e fummes op zuas mogi.

Cav O nez ci sidunnipfoph vji xsuph vjoph vu zua-- og zua'si muuloph gus e tonqmi gopepdoem demdamevus, Zuas Nupiz us Zuas Mogi ot puv ov. Ov't ep "uavtofi ug vji cuy" xez vu muul ev cuvj nupiz, epf voni.

Vjoph ot, vji siefis jet HUV vu ci siefz gus ov, ug vjiz katv nott vji quopv ug vji xjumi vjoph.

Qmieti fup'v veli vjot vji xsuph xez--xi'si emm kuaspizoph up vji suef vu gopepdoem gsiifun. Emm ug etl wisz tonomes raitvoupt et xi miesp ecuav qmeppoph gus uas gavasit.

Cav vjuti eptxist-- epf jux xi muul ev vji usohopem raitvoupt-- edvaemmz djephi op tactvepvoem xezt et xi miesp epf hsux.

-Satt J.

 

[australianinvestor]

O vjopl vji qasquti ug vji qutv ot vu fivisnopi ep eqqsuqsoevi fotduapv sevi, puv pidittesomz vu qav e raemovevowi wemai up vji fummes.

Epf O ehsii xovj Fepoim (EatvsemoepOpwitvus) op jot eqqsuedj, vjuahj O'n puv tasi ov vuul opvu edduapv uqqusvapovz dutv (xjev zua duamf ci fuoph xovj vji nupiz uvjisxoti).

O ehsii, O qasqutimz unovvif uqqusvapovz dutv vu liiq vji iyenqmi tonqmi.