I need help to understand how to work out the following formulae:
a. (€240k * Present Value Annuity(x%, 5 payments)) +
Annual Interest
(€4M * Present Value(x%, 5 periods))
Principal amount
Find x
b. €120,000 * Present Value Annuity (x%) = €309250
Annual Lease Payment Fair Value of asset
Find PVA (x%).
If you have PVA, PMT, N PVA/PMT = the annuity factor for Npayments at interest i.This is unusual but interest could be found easily by using a factor table which shows factors as a function on N and i.Finding i appears quite complex otherwise.
PVA=present value of annuity
PMT= payments to be made over n periods @ an interest of i per period.
Annuity equations are available on line
bjh
So how would I simplify this equation:
309250 = 120,000 * (((1 + i) ^ 3) - 1) / i)
Check: i should be 8%
Links
1. http://en.wikipedia.org/wiki/Annuity_(finance_theory)
[quote=jon80;473274]So how would I simplify this equation:
309250 = 120,000 * (((1 + i) ^ 3) - 1) / i)
Check: i should be 8%
Links
1. Annuity (finance theory) - Wikipedia, the free encyclopedia[/quote
the annuity factor is 309250/120000=2.577 Using a period of 3 years the interest is indeed 8% but your annuity factor is not equal to this so your formula needs to be corrected
bjh