Hi all, Can anyone help me understands how/why, for the years 2-5 they discount the 17,200,000 by (3.889 - 0.917)? I cant really come up with anything for this except that 0.917 = 1/1.09 (where 9% is the discount rate) and no idea where the 3.889 comes from. Perhaps I am missing something simple, but any help would be great. Thanks
Hi Jordan - I don't have the paper to hand, but I'm guessing it is an annuity factor (ie it is discounting to get the PV for all the years at once at 9%). It is often more simple and straightforward to discount each year individually and sum!
