Welcome to the
REX Royalty Financing Calculator
|The REX Royalty Financing Calculator (RRFC) is a tool we are proud to present and make available to those interested in considering and reviewing the effect of a royalty transaction, as based on the data supplied by the user of the tool. Presently there is no charge to use the RRFC and we will store the project data free for 6 months.|
Data entry instructions
Amount (Total Royalty) to be paid to the issuer of the royalty by the purchaser of the royalty
The issuer's projected annual revenues. If only the first few years can be projected then an estimated Compound Annual Growth Rate (CAGR) can be entered for specific periods or for the entire balance of the assumed 20 year royalty payment period. However, the user may enter projected revenues without using the CAGR and may also stipulate fewer than 20 years.
Royalty rates can remain constant for the entire period or can change at certain times, possibly based upon the level of royalty payments received.
Users can estimate both the net after tax (NAT) percentage of revenues the issuer will earn (net of the royalty payments) and a reasonable price/earning ratio (P/E) which investors might apply were the issuer to be publicly traded. This will allow the RRFC user to see both the possible result from the perspective of the issuer, as well as to see the royalty investor's annual and cumulative returns, current yield and approximated resulting Internal Rate of Return (IRR), all assuming the projected revenues are achieved. The formula for IRR and brief example can be found at the following link http://www.investinganswers.com/financial-dictionary/investing/internal-rate-return-irr-2130
Users of the REX Royalty Comparator (RRC) should reflect the estimated amount of the royalties not paid annually in an example in the estimated NAT profit margin, after applying an appropriate income tax rate, to the earnings created by the non-payment of royalties.
The Compound Annual RoR (basically the CAGR of the investment up through time t) is a smoothed return metric that assumes a steady growth over a finite time period. It is essentially the smoothed average growth rate over t years. The Compound Annual RoR, and IRR are both used to decide between competing investments.