Professional Documents
Culture Documents
INTRODUCTION
FV = PV(1+i) n
FV= Future value
PV = initial cash flow
i = interest rate per annum
n = the number of compounding periods
EXAMPLE
EXAMPLE
SOLUTION
FV = PV (1+ mi ) m x n
= 1000(1+0.10/4) 4 x 2
= 1000(1+0.025) 8
= 1000 x 1.2184
= ` 1,218
FV= ?
PV= 1000
m= 4
n= 2
SOLUTION
FV3 = ` 1000 x FVIF(12,3) + ` 2000 x FVIF(12,2) + ` 3000 x FVIF(12,1)
=`[(1000x1.405)+(2000x1.254)+(3000x1.120)]
= ` 7273
(1 i ) 1)
FVA A[
]
i
FVA AxCVFA(i ,n )
EXAMPLE
SOLUTION
(1 i ) 1)
FVA A[
] AxCVFA(i ,n )
i
n
(1 0.10) 1)
FVA 2000[
]
0.10
10
= 2000x 15.94
= ` 31880
SINKING FUND
We know that
FVA=A x CVFA(i,n)
A= FVA x 1/CVFA(i,n)
EXAMPLE
SOLUTION
FV
(1 i )
(1 i ) 1
PVA A[
]
i (1 i )
n
PVA= A x PVIFA(i,n)
EXAMPLE
SOLUTION
A = ` 1000
n= 8 years
i= 12%
PVA=?
PVA= A x PVIFA(i,n)
PVA = 1000 x PVIFA(12,8)
PVA = 1000 x 4.968
PVA = 4968
1
A= P
PVAF
n ,i
A = P CRFn,i
(1 i ) n 1)
FVA A[
](1 i )
i
= A x CVFA(I,n) x (1+i)
= 1000 x 5.416 x 1.04
= ` 5632.64
(1 i ) 1
PVA A[
]
i (1 i )
n
EXAMPLE
SOLUTION
Year
PV Factor
Present
1/(1.10)T
Value (Cr)
`250
0.909
`227.25
T=2
`250
0.826
`206.5
T=3
`250
0.751
`187.75
T=4
`250
0.683
`170.75
T=5
`250
0.621
`155.25
T=0
`1000
T=1
`200
PV Factor
Present
1/(1.10)T
Value (Cr)
`1000
0.909
`181.8
Total
`1181.8
Inflow
`947.5