When the cashflow entries are adequately defined, the Cashflow Chart fills with a graph displaying the dates and values of the entries.. If the number in this box is less than the total
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You can set the Ending Date when you set the Time Interval It holds the SAS date the entries will end
Number of Periods holds the number of entries
Flow Value Specification
Series Flow Type describes the movement the entries can assume:
Uniform assumes all entries are equal
Arithmetic assumes the entries begin at Level and increase by the value of Gradient per entry
Geometric assumes the entries begin at Level and increase by a factor of Gradient per entry
Level holds the starting amount for all flow types
You can set the Gradient when you select either Arithmetic or Geometric series flow type It holds the arithmetic and geometric gradients, respectively, for the Arithmetic and Geometric flow types
When the cashflow entries are adequately defined, the Cashflow Chart fills with a graph displaying the dates and values of the entries The box to the right of the scroll bar controls the number of entries with which to fill the graph If the number in this box is less than the total number of entries, you can use the scroll bar to view different segments of the cashflow The left box below the scroll bar holds the frequency
Subtract becomes available when the collection of entries is adequately specified Clicking Subtract then returns you to theGeneric Cashflowdialog box and subtracts the entries from the current cashflow
Add becomes available when the collection of entries is adequately specified Clicking Add then returns you to theGeneric Cashflowdialog box and adds the entries to the current cashflow Cancel returns you toGeneric Cashflowdialog box without changing the cashflow
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Forecast Specification
Figure 50.37 Forecast Specification
The following items are displayed:
Historical Data Specification
Data Set holds the name of the SAS data set to forecast
Browse opens the standard SAS Open dialog box to help select a SAS data set to forecast Time ID Variable holds the time ID variable to forecast over
Time Interval fixes the time interval for the Time ID Variable
Analysis Variable holds the data variable upon which to forecast
View Table opens a table that displays the contents of the specified SAS data set
View Graph opens the Time Series Viewer that graphically displays the contents of the specified SAS data set
Forecast Specification
Horizon holds the number of periods into the future you want to forecast
Confidence holds the confidence limit for applicable forecasts
Compute Forecast fills the Cashflow Chart with the forecast
The box below Forecast Specification holds the type of forecast you want to generate:
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Predicted Value
Lower Confidence Limit
Upper Confidence Limit
The Cashflow Chart fills when you click Compute Forecast The box to the right of the scroll bar controls the number of entries with which to fill the graph If the number in this box is less than the total number of entries, you can use the scroll bar to view different segments of the cashflow The left box below the scroll bar holds the frequency
Subtract becomes available when the collection of entries is adequately specified Clicking Subtract then returns you to the Generic Cashflow dialog box subtracting the forecast from the current cashflow
Add becomes available when the collection of entries is adequately specified Clicking Add then returns you to theGeneric Cashflowadding the forecast to the current cashflow
Cancel returns toGeneric Cashflowdialog box without changing the cashflow
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Computations
Contents
The Compute Menu 3035
Tasks 3036
Taxing a Cashflow 3036
Converting Currency 3038
Deflating Cashflows 3040
Dialog Box Guide 3042
After Tax Cashflow Calculation 3042
Currency Conversion 3043
Constant Dollar Calculation 3045
The Compute Menu
Figure 51.1shows the Compute menu
Figure 51.1 The Compute Menu
The Compute menu offers the following options that apply to generic cashflows
After Tax Cashflow opens the After Tax Cashflow Calculation dialog box Computing an after tax cashflow is useful when taxes affect investment alternatives differently Comparing after tax cashflows provides a more accurate determination of the cashflows’ profitabilities You can set default values for income tax rates by selecting Tools! Define Rate ! Income Tax Rate from the Investment Analysis dialog box This opens theIncome Tax Specificationdialog box where you can enter the tax rates
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Currency Conversion opens theCurrency Conversiondialog box Currency conversion is necessary when investments are in different currencies For data concerning currency conversion rates, see
http://dsbb.imf.org/, the International Monetary Fund’s Dissemination Standards Bulletin Board
Constant Dollars opens theConstant Dollar Calculationdialog box A constant dollar (inflation adjusted monetary value) calculation takes cashflow and inflation information and discounts the cashflow to a level where the buying power of the monetary unit is constant over time Groups quantify inflation (in the form of price indices and inflation rates) for countries and industries by averaging the growth of prices for various products and sectors of the economy For data concerning price indices, see the United States Department of Labor at http://www.dol.gov/ and the International Monetary Fund’s Dissemination Standards Bulletin Board athttp://dsbb.imf org/ You can set default values for inflation rates by clicking Tools! Define Rate ! Inflation from the Investment Analysis dialog box This opens theInflation Specificationdialog box where you can enter the inflation rates
Tasks
The next few sections show how to perform computations for the following situation Suppose you buy a $10,000 certificate of deposit that pays 12% interest a year for five years Your earnings are taxed at a rate of 30% federally and 7% locally Also, you want to transfer all the money to an account in England British pounds convert to American dollars at an exchange rate of $1.00 to
£0.60 The inflation rate in England is 3% The instructions in this example assume familiarity with the following:
The right-clicking options of the Cashflow Specification area in the Generic Cashflow dialog box (described in the section “Right-Clicking within Generic Cashflow’s Cashflow Specifica-tion Area” on page 3030.)
The Save Data As button located in many dialog boxes (described in the section “Saving Output to SAS Data Sets” on page 3063.)
Taxing a Cashflow
Consider the example described in the section “The Compute Menu” on page 3035 To create the earnings, follow these steps:
1 Select Investment! New ! Generic Cashflow to create a generic cashflow
2 Enter CD_INTEREST for the Name
3 Enter 1200 for each of the five years starting one year from today as displayed inFigure 51.2
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4 Click OK to return to the Investment Analysis dialog box
Figure 51.2 Computing the Interest on the CD
To compute the tax on the earnings, follow these steps:
1 Select CD_INTEREST from the Portfolio area
2 Select Compute! After Tax Cashflow from the pull-down menu
3 Enter 30 for Federal Tax
4 Enter 7 for Local Tax Note that Combined Tax updates
5 Click Create After Tax Cashflow The After Tax Cashflow area fills, as displayed in Fig-ure 51.3
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Figure 51.3 Computing the Interest After Taxes
Save the taxed earnings to a SAS data set named WORK.CD_AFTERTAX Click Return to return
to the Investment Analysis dialog box
Converting Currency
Consider the example described in the section “The Compute Menu” on page 3035 To create the cashflow to convert, follow these steps:
1 Select Investment! New ! Generic Cashflow to open a new generic cashflow
2 Enter CD_DOLLARS for the Name
3 Load WORK.CD_AFTERTAX into its Cashflow Specification
4 Add –10,000 for today and +10,000 for five years from today to the cashflow as displayed in Figure 51.4
5 Sort the transactions by date to aid your reading
6 Click OK to return to the Investment Analysis dialog box
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Figure 51.4 The CD in Dollars
To convert from British pounds to American dollars, follow these steps:
1 Select CD_DOLLARS from the portfolio
2 Select Compute! Currency Conversion from the pull-down menu This opens the Currency Conversion dialog box
3 Select USD for the From Currency
4 Select GBP for the To Currency
5 Enter 0.60 for the Exchange Rate
6 Click Apply Currency Conversion to fill the Currency Conversion area as displayed in Figure 51.5
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Figure 51.5 Converting the CD to Pounds
Save the converted values to a SAS data set named WORK.CD_POUNDS Click Return to return
to the Investment Analysis dialog box
Deflating Cashflows
Consider the example described in the section “The Compute Menu” on page 3035 To create the cashflow to deflate, follow these steps:
1 Select Investment! New ! Generic Cashflow to open a new generic cashflow
2 Enter CD_DEFLATED for Name
3 Load WORK.CD_POUNDS into its Cashflow Specification (seeFigure 51.6)
4 Click OK to return to the Investment Analysis dialog box
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Figure 51.6 The CD before Deflation
To deflate the values, follow these steps:
1 Select CD_DEFLATED from the portfolio
2 Select Compute! Constant Dollars from the menu This opens the Constant Dollar Calculation dialog box
3 Clear the Variable Inflation List area
4 Enter 3 for the Constant Inflation Rate
5 Click Create Constant Dollar Equivalent to generate a constant dollar equivalent summary (seeFigure 51.7)