Cost of Capital^35
Step 4: Insert the values as given in the example. Here r = I = 0.05, Nper is the number
of periods = 20, Pmt is the periodic annuity (how to use it we will see a little later) = 0
in this case as there is no annual payment except the first one. Pv is the present value
= Rs 7000 in this case and Type is a value representing the timing of the payment = 0 in
this case as the investment is done at the end of the period 0 or at the start of the period
- This also means that we get the returns at the end of the period 20 simultaneously
when we make the last payment. Putting these values we get the following screen.
Note that the result of the figures that you input is shown in the formula result section
where it is Rs 18,573.08. Compare this with the figure that you get from using the value
from the table, a difference of Rs 0.02. Negligible.
What if the money was payable at the start of the period rather than at the end of the
period? Here it does not matter as there is only one investment and that is also at the
start of the first period. It would matter when we look at the future value of the annuity.
But what is an annuity anyway?