Editing Present value (section)

== Years' purchase ==
The traditional method of valuing future income streams as a present capital sum is to multiply the average expected annual cash-flow by a multiple, known as "years' purchase". For example, in selling to a third party a property leased to a tenant under a 99-year lease at a rent of $10,000 per annum, a deal might be struck at "20 years' purchase", which would value the lease at 20 * $10,000, i.e. $200,000. This equates to a present value discounted in perpetuity at 5%. For a riskier investment the purchaser would demand to pay a lower number of years' purchase. This was the method used for example by the English crown in setting re-sale prices for manors seized at the [[Dissolution of the Monasteries]] in the early 16th century. The standard usage was 20 years' purchase.<ref>Youings, Joyce, "Devon Monastic Lands: Calendar of Particulars for Grants 1536–1558", Devon & Cornwall Record Society, ''New Series'', Vol.1, 1955</ref>