|Subject:||PV, Annuity, Lump Sum|
|Date:||Fri, 4 Jul 2008|
I am looking at John Walkenbach's Excel 2007 Formulas. On page 302, he
has the result of a formula that I think is an error. I am not
confident enough to be sure. In fact, my answer doesn't look right.
The formula is based on the following scenario:
Your brother-in-law wants you to invest in his carpet cleaning
business. If you'll invest $50,000 now, he will pay you $200 per month
for five years and also pay you $60,000 at the end of the five years.
Are you making a good investment?
Here are the arguments:
Walkenbach's answer: $45,958.83 based on this formula: =PV(0.8%, 60,
200, 60000, 1)
My answer: $69,309.80 based on this formula: =PV(0.8%/12, 60, 200,
The difference between the two answers is in the first argument. I
can't understand why you do not divide the rate by 12 since we are
dealing with monthly payments.