• Avatar of johnmoffat says

      For individual flows use the present value tables. When there is an equal cash flow each year, then use the annuity table.

      (This is one of the revision lectures – have you watched the main lectures on this topic?)

    • Avatar of johnmoffat says

      The nominal annual interest rate is the actual rate of interest per annum, taking into account the effect of compounding.

      So if, for example, interest is charged at the rate of 5% every six months, then the nominal interest rate (the actual rate per year) is (1.05 x 1.05) – 1 = 0.1025 (or 10.25%)

    • Avatar of johnmoffat says

      @angelang, The lecture does explain it!

      For the payback period we are seeing how many years it will take to get back the original investment of 75000. After 2 years we have got a total of 50000 (20000 + 30000). So we need another 25000 (75000 – 50000). In the third year we get 50000 and so we will get 25000 in half the year. So total is 2.5 years.

Leave a Reply