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  1. avatar says

    Please help me to solve this Question. An equal payments of $200 is deposited in an account every month for 6 years. Interest is 15% p.a which is Compounded every month. What will be the balance after 6 years?.

    • Avatar of John Moffat says

      You need to use the annuity formula to get the present value of 200 a month, and then you need to compound the present value to get the terminal value by multiplying by (1+r)^n

      To get the present value you multiply 200 by 1/r x (1 – 1/(1+r)^n) and then to get the terminal value you multiply by (1+r)^n

      (or you can do both steps at once by multiplying 200 by 1/r x ( (1+r))^n – 1) )
      r is the monthly interest rate and r is the number of months.

  2. avatar says

    Can someone please help me, trying to procuce an investment appraisal for a project for my HND accounting exam. Can someone tell me if it is both fixed and variable costs that go in to get your cash flow or only variable? and also is depreciation of the machine included in this also?

    Need reply ASAP.

    Thanks

  3. Avatar of nakeshia says

    A project has a normal pattern of cash flows. If the company’s cost of capital decreases what would be the effect on the NPV and the IRR.

    Would NPV & IRR stay the same?

    Need urgent reply.

    • Avatar of John Moffat says

      The NPV will change – with a lower cost of capital, the NPV will increase (which is logical – with less interest cost the project becomes more worthwhile).
      Try is yourself – discount at a lower interest rate and see what happens.

      The IRR will not change – it is not dependent on the cost of capital.

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