# Appreciation Calculator

*“Financial Management: Theory and Practice“*(2016)

The appreciation calculator is a tool that helps you **find the future value of anything.** It may be home appreciation, investments, or anything else you need, but first you need to know how to calculate appreciation and what it is. Remember that **if the value of your product decreases** over time you may use the depreciation calculator or use a negative appreciation rate.

## Appreciation definition

The appreciation definition explains that appreciation is simply is an increase in value - that after a defined period, the value of the good or service will be higher. **Appreciation rate** is the percentage of the increased value compared to the original value. Appreciation works similarly to compound interest. After each period, the value increases depending on the provided rate.

More common is the opposition of appreciation - depreciation - which would be a **decrease in value.** Both appreciation and depreciation use the same formula, with either rates that are below zero (depreciation) or above zero (appreciation). Many assets easily come to mind which we expect will grow (appreciate) or decrease (depreciate) in value.

For example, once you are buy stocks, a house, or any other investment, you expect that their **value will appreciate.** Once you are buy a smartphone, clothes or a car, you know that their value **will probably depreciate.**

## How to calculate appreciation?

There is a **formula** that may help you find the future value of the product:

` finVal = stVal * (apRate + 1)`

^{period}

where:

**Starting value**(stVal) - how much your product costs;**Appreciation rate**(apRate) - what is the growth rate value of the product;**Period**- the time over which the appreciation is calculated;**Final value**(finVal) - how much will the product cost at the end of the defined period; and- This is
**all you need**to know to find, for example, your future home value.

**The appreciation calculator works both ways.** It means that you may calculate either the **future value** based on the provided appreciation rate or calculate **appreciation rate** based on provided future value. Just input the data you have and check the results.

## Appreciation examples

Imagine buying a house as an investment. Historically, from 1968 to 2009, **appreciation rate** for houses was around 5.4%. Use the tool as the future home value calculator and check the value of your house in the next three years! Let's assume you bought your house for **$150,000 in 2018** and you wonder what will be its **value in 2022.** Let's see how to calculate appreciation in this case.

Using the appreciation formula from the previous section, we can input the data from the example to get:

` finVal = stVal * (apRate + 1)`

^{period}

`Future value in 2022 = $150,000 * (5.4% + 1)`

^{4}

`Future value in 2022 = $185,120.15`

If the appreciation rate for houses remains at 5.4%, the home appreciation calculator finds out that your house **will be worth $185,120.15 in 2022!** That is your return on investment!

Let's go the other way now. Imagine a situation where you **want to know what the appreciation rate should be** to get a specified future value. For example, using the data from the previous case, you would like to know what the appreciation rate should be for your house to reach $200,000 in 2022. You may manipulate the formula, or **just input data into the calculator!**

` finVal = stVal * (apRate + 1)`

^{period}

` apRate = (finVal/stVal)`

^{1/period} - 1

` apRate = ($200,000/$150,000)`

^{1/4} - 1

` apRate = 7.457% `

It means that your future home value will reach $200,000 in 4 years only if **the appreciation rate is 7.457% every year.**