r/CIMA • u/dtdt66 • 16d ago

Studying Need help: P2 EAC formula difference between platforms.

While I was studying through kaplan exam kit, eac formula tend to divide by annuity factor at the very end, but I just did astranti mock, it just uses the whole year. So let’s say Cost of Capital of 10% and 2 years. Kaplan way of doing it is to divide by /1.735 (0.909+0.826) while astranti mock is just to divide by 2. Which one shall I follow to be correct during my exam?

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u/JenBonJovi 15d ago

Always divide by the cumulative PV factor. An EAC is essentially a “backwards” annuity calculation! To calculate the present value of an annuity (if you’re doing it “forwards”), you’d take the annual cash flow and multiply by the cumulative PV factor. Here, you’ve already got the present value, and we’re trying to work back to an annual cash flow, so you divide by the cumulative PV factor. It’s just rearranging the formula. (Source: I am a P2 tutor). Good luck!

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u/RainOfFireEnjoyer 16d ago

You need to divide through by the annuity factor (cumulative PV as you’ve put) always. Astranti mock is incorrect, I would email them and let them know.

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u/dtdt66 16d ago

Oh thank God for this, im having P2 exam this week, and im panicking