[Avish]

Great…Thank you very much Sir 🙂

[Avish]

Thank you John, I’ve always hate learning by heart. I love to get the logic behind so I can face any situation in the exam.
Indeed, I’ve now got the logic behind borrowing rate and deposit rate. But, technically it’s hard to remember. I’ll kept revising till date of exams.
Thank you very much Sir 🙂

[Avish]

Thank you very much neha.
I got it for now…but I’m still struggle to understand when to use the borrowing rate and deposit rate.

For this case, it’s a foreign receipt. But if it was for a foreign payment…you would have calculate present value by which rate…deposit rate or borrowing rate….

I think I’m gonna to learn by heart, the steps to follow when there is foreign payment or foreign receipt.
Niway, thank you 🙂

[Avish]

Ya..I agree.
I was working J13 and went through the solution and noticed that there is no w.c recovery in the examiners answer.
My answer defer from those provided in the M.s specially because of that w.c recovery.
Awaiting for John response to clear the issue.
Thank you.

[Avish]

Exactly
Equivalent Annual Cost (EAC) = NPV / Annuity factor

Assume the question says the asset is going to last 4 years. Applying the above formulate.
1. Calculate NPV using all assets related cash flows.
2. Take NPV calculated in step 1 and divide by Annuity factor (Y1 – Y4)
(Assuming that you have an NPV of $200,000 and a D.F @ 12%)

EAC = 200,000/3.037
3.037 is from your annuity table @12% for year 4

Good Luck 🙂

[Avish]

I’ve got you’re point.

Thanks you very much.

[Author]

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