|Introduction: The UK Valuation DCF family has functions for calculating exit capitalisation values and equivalent yields. This family uses our own derived property math, which we call DCF math because it adheres as strictly as it could do the laws of DCF. There is another family, the UK Valuation family, that uses the type of math conventional used in the UK. We are interested in adding functions for the US - please get in touch with us if you have an idea. Our understanding is that the US uses DCF fairly exclusively.|
The functions in this family fall into 2 main groups:
- There are functions that calculate capitalised values and equivalent yields, where which one you use depends on the form of your input data (they all use the same underlying math). If you have a passing rent and a market rent, with possibly a rent free period, then EqYieldDCF and CapValueDCF will do this simple job rather well, either for Nominal or True AER Yields. If you have a number of stepped rents there is the generalised form EqYieldDCFG and CapValueDCFG. Finally, if you want to use dates rather than deferrals in months, you can use the date versions EqYieldDCFGD and CapValueDCFGD. Unlike the conventional math used in the ÅValuationÅ family, we guarantee that our DCF math is consistent with how financial assets (eg annuities) are normally valued, and as such the stepped versions work just fine without any inaccuracy.
- There are utility functions that use the same underlying math to convert True to Nominal Yields and vice-versa (NomToTrueDCF and TrueToNomDCF), for any specification of rental frequency. And there is the well-know standard YPPDefDCF, the "deferred Years Purchase of a Perpetuity" formula. To this we add the YPADefDCF, which is the annuity version. There are other functions also that derive from the same approach to present valuing rental streams, such as TheorYield (theoretical yield), ImpGrowth, ImpDiscRate and PVRent.
This family has a strong technical element to it and we have written a paper, available online, that details our approach: