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Forums › Ask ACCA Tutor Forums › Ask the Tutor ACCA AFM Exams › Arbore Co 12/12
Hi John,
Dont understand how the annuity is calculated in this question
Y1 is 0 first investment
Y2 is 1 second investment
Y3 is 2 third investment
Y4 is 3 Cash flows start at the end of year 4 so start of year 5
Y5 is 4 and it is from year 5 that we calculate the 15 years so shouldn’t the annuity be year 18 less year 3
they calculated the annuity by taking year 15 and times the present value of year 3….is this because the year 18 was not provided and this is the quickest step to get it? so essentially if year 18 was given it would be year 18 annuity less year 3?
You can do it either way and apart from rounding (which is irrelevant) you will get the same answer.
As you say, it is just that because the tables don’t go up to 18 years, it would mean calculating the 18 year factor using the formula.