Sunday, August 26, 2012

Income Replacement

I made a spreadsheet that will calculate the time needed for income replacement through dividends.  The share price is an irrelevant column as you can change the starting price to whatever you want and it doesn't effect the calculations.  It was easier for me to think about how to set up the spreadsheet by using the column.

The inputs are your current investment amount and yield on cost as well as the expected annual share price appreciation and dividend growth rates.  Since no company can increase their dividends at an elevated rate forever you also put in the expected length of the elevated dividend growth rate as well as the terminal rate.  By inputting these values as well as your annual investment, income needed to be replaced and expected inflation amount it will calculate annual dividends that you would receive.  There is also a tab for a chart to graphically show the results.

I'm pretty sure the spreadsheet is correct but it wouldn't hurt to have someone else's eyes look at it.  Feel free to check out the spreadsheet here and let me know what you think.

Income Replacement Spreadsheet

I can't get it to open the spreadsheet how I wanted it but you can open it as is and then go to File->Download to save it to you computer and play around with it.

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