Basic Assumptions - Corporate Component

It is important that you are aware of the assumptions Snap Projections uses in its internal calculation engine for the Corporate Module. This will help you gain a better understanding of the calculations and be able to assess the impact of these assumptions on long-term projections for the corporation.

Asset Growth and Timing of Contributions /Withdrawals

  1. Values that you enter for Corporate Capital and Real Assets and Debt balances are considered start-of-year values for the first year of projections. Asset growth is calculated annually. 
    • Note: For scenarios created later in the year you may not wish the Corporate Assets to accumulate an entire year's worth of growth in a few months.  In this case, you can start the projections in January of the next year so that the values you enter will be the start value for January 1 of the next year. 
  2. The Capital Asset ValueReal Asset Value, Debt Amount Owing, and Net Worth values are the year-end values (as of December 31 at 11:59 pm).
  3. If there are multiple assets listed as part of the Corporate Assets
    • any surplus in the year is split and added to all assets evenly (e.g., $100K surplus with 4 Corporate Assets results in a contribution of $25K to each).
    • assets are withdrawn from automatically in sequential order from first to last on the Corporate Assets page.
  4. Withdrawals from Capital Assets are made at the beginning of the year (this is the most conservative scenario since it is typically difficult to determine when they will occur).
    • Note: This setting currently cannot be changed.
    • Taxes are considered to be paid at the beginning of the year.  Dividend tax credits are applied in the year following the dividend payout.
    • Salary, expenses, and dividends are paid out at the beginning of the year as well.
  5. Contributions are made at the end of the year.
    • Note: This setting currently cannot be changed.
    • Business Income and Other Income are considered to be contributed to the corporate assets at the end of the year.
  6. Capital Asset growth is calculated annually
  7. Real Asset growth is calculated annually (but is pro-rated daily if an asset is bought/sold throughout the year).
  8. The interest rate on all Debts is nominal and compounded monthly.

Note: For information on the assumptions made in Snap related to the corporate disposition on death, please refer to the Capital & Estate article.


Sample Calculation for the Net Worth

Here is a simple example to demonstrate the calculation of the Net Worth end-of-year value. There is one corporate Capital Asset with a beginning of year value of $1M. No active business income or expenses, no dividends paid out.


Calculation: 

Corporate Asset value on Jan 1, 2021 = $1M. 

Corporate Income Tax calculated as $27,239.  (Based on an iterative process, Snap is able to run multiple simulations to predict upfront the tax payable for the year, and set this amount aside to pay the tax.  The residual will then be deployed for investments.)

The new start of year Capital Balance is calculated as $1M - $27,239 = $972,761.

Based on this principal amount of $972,761 and a 6% rate of return on investments, $58,366 is the investment income for the year of which $27,239 is the tax payable on this investment income.  This amount ends up being the same as the amount that was set aside to pay the taxes at the beginning of the year.  The Capital Asset Value at the end of the year is $1,031,126. This is also equal to the Corporate Net Worth since no Real Assets or Debts have been entered.

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