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| I posted this below, but I think it belongs in this thread as well. This will give you a general idea on how the Net Present Value/Cost process works. I apologize for the “noisiness” of the image, but there is not a good way to consolidate the information any more than it already is.
These numbers are from a spreadsheet I made several years back when we were trying to decide whether or not to trade from a 1083 to a 2208 corn header. These numbers are based on future predictions so they are not actual values…but I think the real numbers are playing out in our favor. What you see in the blue boxes are the characteristics of our business: the discount rate of our money, the principal and interest payments, operating expenses, our depreciation schedule, and any additional income that the investment would make. The top table is the scenario for trading corn headers and the bottom one is keeping the 1083. As you can see the numbers are very different, but the end result is the same. Both options are completely equal in value if everything is carried out exactly as I have entered it.
If you are having trouble seeing the image, then open the attached .htm file. It contains my initial cost prediction for trading corn headers that has a lesser attractive (higher) net cost. The reason why I wanted a scenario that had the same net cost as keeping the older header is because I wanted to see what annuity (additional bushels in the grain tank) we would need in order to justify the cost of upgrading headers.
Mav
 (NPC.jpg)
Attachments
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 NPC.jpg (98KB - 44 downloads)
NPC.htm (61KB - 57 downloads)
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Rolling new combines...how to calculate net present value
