Introduction to Valuation

Simple Interest

Compound Interest

Amount of £1

Present Value of £1

Amount of £1 per annum

Mr Y is 30 and he has taken out a life insurance policy. His annual premium is £650 per annum, payable at the end of each year and the policy will mature when he retires at 65. How much all he receive on maturity of the policy assuming an annual interest rate of 4.25%?
What methods would be used?

Annual Sinking Fund

Calculate the amount that has to be invested at end of each year over 25 years assuming interest at 3.5% per annum in order to have £90,000 at the end of the term.
What method would you use?

£30,000 invested per annum over 6 years assuming an interest rate of 6.75%.
What method would you use?

I need £75,000 in 7.5 years time and I can achieve an interest rate of 4.5%.

What method should I use?

Rack-Rented Valuation

Term & Reversion

Hardcore Method

Short-cut DCF

A high street shop was let 2 years ago at £75,000 pa on a 15 year lease with 5 yearly rent reviews. The ERV is now £80,000. Market evidence indicated that a similar shop at an initial yield of 7.00% recently + investors require a TRR of 10% for similar investments. Using a 3.42% pa growth rate.
Which method should you use?

Rent with growth

YP for a term of years

YP into Perp

YP of a reversion into perpetuity

Uses for ASF