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Subject: Annuitycalculating NPV  Date: 10/5/2003 6:33 PM  
Author: jesserivera67  Number: 37396 of 85582  
Now that all of you have me obsessed with making sure I have this right and comparing apples to apples...let's begin with the constants: Assets: $199,000 Estimated Annual Growth: 6% Term: 7 years (until they start withdrawing) Fees: 2.34% (the actual fees of the annuity) American Express results: Total Fees: $38,421.95 Foregone Earnings: $7,281.09 Total Fees and Foregone earnings: $45,703.04 Total Assets after 7 years subtracting fees: $253,519.39 Vanguard results (.3% fees) Total Fees: $4,837.59 Foregone Earnings: $889.12 Total Fees and Foregone earnings: $5,726.70 Forgone earnings on $16,000 surrender charge: $24,058 Total Assets after 7 years subtracting fees: $269,437.63 Now the following is the calculation for standard Present Value: FV PV =  n (1 + r) Now if I understand the NPV correctly it would equate to the PVI where I respresents the Initial Investment... NPV for the Vanguard is $183,000...got it. NPV for Amex more complex as it is in the annuity. Here's where I'm struggling...If I understand correctly using numbers from above, the FV of the Amex example is $253,519, So using the above equation... PV = $168,604 Meaning in order to get $253,519 in 7 years at 6% interest, I should be starting off with no more that $168,604...but... NPV = PV  I NPV = $168,604  $199,000 NPV = $30,395 Since NPV is a negative number, meaning with this investment I'm starting with $199,000 or $30k more than I should I should pull out...have I got this right now? Whew... 

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