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Texas Instruments BA II PLUS User Manual

Page 35

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Time-Value-of-Money and Amortization Worksheets

31

Perpetual annuity due

Because the term (1 + I/Y / 100)

-N

in the present value annuity equations

approaches zero as N increases, you can use these equations to solve for
the present value of a perpetual annuity:

Perpetual ordinary annuity

Perpetual annuity due

Example: Computing Present Value of Variable
Cash Flows

The ABC Company purchased a machine that will save these end-of-year
amounts:

Year

1

2

3

4

Amount

$5000

$7000

$8000

$10000

PV

PMT

I/Y

(

) 100

÷

----------------------------

=

PV

PMT

PMT

I/Y

(

) 100 )

----------------------------

+

=