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Chapter 14





                            Annuities and Perpetuities





               6.1 Annuities

               In the special case where a project has equal annual cash flow, the discounted cash
               flow can be calculated in a quicker way.

               When a project has equal annual cash flows for a number of years the annuity factor
               may be used to discount the cash flows.

               The present value of an annuity can therefore be quickly found using the formula:

               PV = Annual cash flow × annuity factor (AF)


               The annuity factor can be looked up on the annuity (cumulative present value) table
               or found using an annuity formula:



                                                               -n
                                                     1− (1 + r)
                              Annuity factor  = ————————
                                                          r









































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