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PRACTICAL APPLICATIONS OF COMPOUNDING AND PRESENT VALUE TECHNIQUES

In the preceding’ sections we have outlined compounding and discounting techniques. These values have a number of important applications, relevant to the task of the financial manager and investors. Some of these are illustrated here.

1. A financial manager is often interested in determining the size of annual payments to accumulate a future sum to repay and existing liability at some future date or to provide funds for replacement of an existing machine/asset after its useful life.

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