Calculating PV of lease payments (BGN mode vs END)

CFA Level II
#1

Guys,

It see when i am using the NPV function in the BA II Plus calculator (for calculating the present valuing of lease payments)- it gives me the same figure whether its in BGN or END mode…

Can somebody pls confirm.

So, say CF1 = 5, CF2=10, I=6% , NPV (BGN) = 13.616

So, say CF1 = 5, CF2=10, I=6% , NPV (END) = 13.616

It seems that when the problem asks for BGN , i will have to use the Annuity formula (as provided in the CFA mock solution)

#2

For NPV you’re telling it (explicitly) when each cash flow is paid (time 1, time 2, . . .); BGN/END isn’t relevant.

#3

BGN/END applies only to the TVM worksheet. If you are using NPV and require payments at the beginning of the period, CF0 will handle that, e.g. CF0=5, CF1=10, F01=1, I=6% NPV=14.43396

#4

Thanks S2000 & breadmaker

#5

My pleasure.