Business Cost Calculator present value report
Here, you get option information, including its description and the businesses affected, total present value of costs per business and total present value of costs for all businesses. You'll also see ongoing costs. These are affected by the timeframe and discount rate you've chosen and applied. This means, you can see the costs businesses face now and into the future.
It's assumed the ongoing costs are recognised on 1 January of every year.
You can't add current and future costs without including a timeframe and discount rate. Businesses often prefer to defer their costs. (This reflects the fact that money not spent now can be invested to return the original funds, plus interest, at some time in the future.)
To add costs over time, you need to 'discount' them, that is, calculate the present value. The discount rate reflects the interest that could be earned on the money over the timeframe you've given. The default discount rate is 7 per cent, but you can enter your own discount rate.
The present value formula used is:
- Present value for Year n ongoing cost = Year n ^{} ongoing cost / (1 + discount rate)(^{n-1}), where n = 1 to n years and the cost is recognised on January 1 of Year n.