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Specimen 1 question 2.b.I.
I couldn’t understand how the calculation has been done. Any help appreciated
Figures at the bottom of the spreadsheet have been rounded to 0.09, 0.02, 0.12.
Then they have to be discounted at 12%. For 1, 2 and 3 years respectively to take into account the time value of money. You could use discount tables or calculate discount factors from first principles:
1/(1 + 0.12), 1/(1 + 0.12)**2, 1/(1 + 0.12)**3.
Where ** means raise to the power.
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