I am still cracking the IPS part. It seems that I always fail to calculate the return correctly. Any suggestion or advice for that? Personally I think that a method can be consitently used no matter how ugly the problem looks. So I decide to follow the example of Ingers. When I applied that to Susan Fairfax case, I got different answer. Year 7 Susan will retire and will not have any salary to cover her living expenses. I calculate the return as cash flow in year 7 divided by the net asset value in year 6. NAV in year 6= 10000000+2000000(1+3%+4%)^6=13001461 Her base salary is sufficient to support her present lifestye and generate no excess for savings, her spending is also growing with inflation. so I calculate spending (cash flow) in year 7 as (500000-175000tax)*(1+4%)^7=427678 and nominal return after tax is 3.29%, different from 5%.
Anyone who can help?
search, it’s been discussed
found your previous discussion, thanks.