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Dear Tutor / Other Members, whoever can clarify.
When sold for $11m, higher than Fair Value, we consider it as additional financing. Therefore, Liability increases from 10 million to 11 million, and is recorded at Present Value. So, 11m over 10 years makes it 1.1m per year. For present value, we must now multiply this 1.1m with the Annuity Factor of 7.72 to get 8.49m. Why are we simply adding the additional 1m as it is to the 7.72m recorded while taking into consideration the 10m, whereas the 10m has effectively changed to 11m, and the additional 1m financing must also be discounted to PV?
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