This screen calculates and displays the present value of the taxes paid. That is, it calculates in today’s dollars how much you would need to put in a fund which would: 1.Be compounded at the net opportunity investment return. 2.Pay the taxes due at the end of each year. 3.Have a zero balance at the end of the projection. |
This screen calculates the present value of the taxes paid. The documentation proves that the lump sum present value of the taxes would be consumed over the time period by the taxes paid. |
All compounding is performed annually. The present value of the taxes paid is calculated using the time value of money calculation for present value with the following variables: Rate: Net opportunity cost rate or return Period: Number of years in the projection FV: Cumulative opportunity cost of tax at the end of the projection Net opportunity cost rate of return = Investment rate of return * (1 - tax rate). [The investment rate net of taxes.]
The proof documentation calculation is performed in a worksheet defined as follows: Column 1: Side fund balance at the beginning of the year. Column 2: Side fund interest earned: (Column 1 * Net opportunity cost rate of return). Column 3: Side fund tax payment at the end of the year: (pulled from prior compound interest projection). Column 4: Side fund balance at end of the year: (Column 1 + Column 2 - Column 3). |