What are the Advantages of Sinking Funds?
1. Brings in investors: Investors are very well aware that companies or organizations with a large amount of debt are potentially risky. However, once they know that there is an established sinking fund, they will see a certain level of protection for them so that in the case of a default or bankruptcy, they will still be able to get their investment back.
2. The possibility of lower interest rates: A company with poor credit ratings will find it difficult to attract investors unless they offer higher interest rates. A sinking fund offers alternative protection for investors so that companies can offer lower interest rates.
3. Stable finances: A company’s economic situation is not always definite, and certain financial issues can shake its stable ground. However, with a sinking fund, the ability of a company to repay its debts and buy back bonds will not be compromised.
How to Calculate Years Purchase when Sinking Fund is Recovered?
Years Purchase when Sinking Fund is Recovered calculator uses Years Purchase = 1/(Rate of Interest on Capital+Rate of Sinking Fund) to calculate the Years Purchase, The Years Purchase when Sinking Fund is Recovered formula is defined as the capital sum required to be invested in order to receive a net annual income of Rs/- 1 at a certain rate of interest. Years Purchase is denoted by Y symbol.
How to calculate Years Purchase when Sinking Fund is Recovered using this online calculator? To use this online calculator for Years Purchase when Sinking Fund is Recovered, enter Rate of Interest on Capital (Ip) & Rate of Sinking Fund (Is) and hit the calculate button. Here is how the Years Purchase when Sinking Fund is Recovered calculation can be explained with given input values -> 11.0011 = 1/(0.08+0.0109).