Page 245 - Microsoft Word - 00 ACCA F2 Prelims.docx

Capital budgeting

Time value of money

2.1 Simple interest

Simple interest is calculated based on the original sum invested. Any interest earned
in earlier periods is not included:

V = X + (X × r × n)

V – future value

X – initial investment (present value)

r – interest rate (expressed as a decimal)

n – number of time periods

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