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Lets say for example a discount factor is 5.8% or 6.3% – how do i find the rates for these? -since the discount tables does not go into fractions
Use the formula given on top of those tables I.e for 5.8 it will be 1.058^-1 for 1st year
Yes, I also read John’s reply to a post he too said it’s ok to round it off.
And No problem JasonSameed: Thanks for answering, but this forum is for questions to the tutor (which is me 🙂 )
Please restrict yourself to answering on the general forum.Jason91: Sameed is correct in that you can calculate the discount factor using the formula at the top of the discount factors sheets.
However, the examiner does not usually expect you to be that precise (nothing in investment appraisal is precise in real life or exams – the cash flows themselves are only estimates and the chances of them being accurate in real life is almost impossible 🙂 )For that reason, you should usually simply use the nearest whole %. (i.e. if you calculate a WACC of 5.8% then simply use the discount factor from the tables for 6%).
This is usually what the examiner himself does in his answer.Valuable points noted Sir. I am studying for my final option papers (P4 and P7) on my own (self-study) and therefore i am very grateful for this assistance.
Thank you!
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