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Hello Mr.Moffat
I didn’t quite understand how to do the valuation of debts chapter
I tried looking at your video to understand and I found that you used the annuity factor for the first part and then the present value in the next partI didn’t quite understand that part for why you did that
The interest each year is an annuity – an equal payment each year. Therefore it is quicker to use the annuity factor than discount each year separately.
The redemption (repayment) is not an equal payment each year but just a ‘one-off’ payment and therefore has to be discounted separately using the normal present value factor.
If you are unsure about using the two sets of discount tables then do watch the Paper MA lectures on investment appraisal, because the discounting itself is purely revision from Paper MA (was F2).
Thank you very much
I find it much easier to do questions in regard with redeemable debt now 🙂
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