CAPITAL RECOVERY FACTOR METHOD - Accounts and Finance for Managers

CAPITAL RECOVERY FACTOR METHOD

Illustration

If your father deposits Rs.1,00,000 on retirement in a bank which pays 10% annual interest. How much can be withdrawn annually for a period of 10 years?
A = PVA(1/PVIFA)
A = Rs.1,00,000 (1/6.145)= Rs.16,273

Present Value of Perpetuity

Perpetuity means that series with indefinite duration
P? = A × PVIFA k, ?

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The present value of perpetuity of Rs.10,000@ 10%, how much should be invested on today ?
A = P?/ PVIFA k, ?
= Rs.10,000/.10= Rs.1,00,000


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