The valuation of debt finance, and duration (part 2) - ACCA (AFM) lectures

[@user-up7mm4ts1s]

Thank you John

[@siddharthkrishna1844]

Thank you, sir!

[@amaralalitha2523]

I'm just curious as to why we multiply the years and the PV, I'm sorry I can't understand if you explained in the lecture, but is there a reason why ?????

[@Rhythmrift388]

Because we needed weighted pv of the inflow phase. We weight them by multiplying with the relevant years.

[@irdinazafira6347]

do you know the answer already?? if you dont mind, can you share the answer... >.

[@irdinazafira6347]

btw, i just realised the explanation given on this, basically we need to multiply the years and the pv is just to calculate the proportion(simply use as ratio) ,basically the calculation done is the shortcut formula, for the longer one you need to do it like ((pv1/ total pv * 1 yrs) + (pv2/total pv *2 yrs )+........) it just will produce the same answer...

[@moshoodkassim4982]

It is assuming you earn the same amount in each year up to that year, eg you earn 6.01 in Y1, Y2 and Y3 and in Y5 you earn 73.28 in Y1,Y2,Y3,Y4 and Y5. and the average of that will be divided by the PV 98.63