Last week, I conducted a webinar on Time Value of Money (TVM). I demonstrated five TVM formulas to do analysis and make better financial decisions.
After the webinar, Ian, my partner, asked if the TVM formula could calculate his annual returns from an investment of a dividend stock. I was given the following details:
Investment Price = S$ 1.037 (after brokerage fees)
Year 1 Dividends = 7.504 cents
Year 2 Dividends = 7.759 cents
Year 3 Dividends = 8.076 cents
Year 4 Dividends = 8.192 cents
Year 5 Dividends = 8.560 cents
Market Price (4 December 2021) = S$ 1.87
We need an advanced TVM formula to calculate Ian’s returns.
Hence, in the next live webinar, I’ll share how to calculate IRR and XIRR and use them to make wiser financial decisions.
Apart from Ian’s investment, we’ll explore:
- How to use IRR to assess returns of a savings plan (with irregular premium and cash payout)?
- How to use XIRR to assess stocks, unit trust, properties?
- How to analyse the following situation where I put up the problem as homework for all attendees:
Question: Which way do you want to get paid?
A. $10,000 now
B. $10,100 next month
C. $12,000 one year later
D. $14,000 two years later
E. $5000 now, $7000 one year later