Question

I had a quick question on the EAC Computation.

Example:-

NPV: -$284,782.49

PVIFA ( 9%,3)

EAC: -$112,504.68

Now if I happen to put the above values in the financial calculator, PV = -$284,782.49, I/Y= 9% and N= 3
CPT Payment .

I get it as $112,504.68 ( positive)

So, it gives me a positive value instead of a negative. Now, all I wanted to know is because this is an outgoing cost are we marking it as negative or should it be positive?

How do we get the same value with Financial Calculator?

Answer 1

Whenever we are to calculate PV or EAC

One should be negative and other should be positive

For example we take a Loan and pay emi so in this instance eac would be negative whereas PV would be positive as it is assumed that we are taking loan i.e. cash inflow but paying emi i.e. cash outflow so everytime we need to make out our cash inflow and cash outflow

Cash inflow should be indicated with a positive sign whereas cash outflow should be indicated with a negative sign

So if we take a Loan

PV shall be positive whereas EAC should be negative

And if we invest and we would be getting return

PV should be negative indicating cash outflow and return should be marked as positive indicating cash inflow

Please Like the solution if satisfied with the answer and if any query please mention it in comments...thanks