Annual Sinking Fund using Sinking Fund Method Calculator

✖The Rate of Interest is the percent of principal amount charged for the due period.ⓘ Rate of Interest [I_r]			+10% -10%
✖Life of Asset in Years is the number of years the asset is expected to be used in its lifespan.ⓘ Life of Asset in Years [x]			+10% -10%

✖Annual Sinking Fund is an account containing money set aside to pay off a debt or bond in a year.ⓘ Annual Sinking Fund using Sinking Fund Method [S_a]

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Formula

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Annual Sinking Fund using Sinking Fund Method

Formula

`"S"_{"a"} = "I"_{"r"}/((1+"I"_{"r"})^"x"-1)`

Example

`"0.083333"="10"/((1+"10")^"2"-1)`

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Annual Sinking Fund using Sinking Fund Method Solution

STEP 0: Pre-Calculation Summary

Formula Used

Annual Sinking Fund = Rate of Interest/((1+Rate of Interest)^Life of Asset in Years-1)
S_a = I_r/((1+I_r)^x-1)
This formula uses 3 Variables

Variables Used

Annual Sinking Fund - Annual Sinking Fund is an account containing money set aside to pay off a debt or bond in a year.
Rate of Interest - The Rate of Interest is the percent of principal amount charged for the due period.
Life of Asset in Years - Life of Asset in Years is the number of years the asset is expected to be used in its lifespan.

STEP 1: Convert Input(s) to Base Unit

Rate of Interest: 10 --> No Conversion Required
Life of Asset in Years: 2 --> No Conversion Required

STEP 2: Evaluate Formula

Substituting Input Values in Formula

S_a = I_r/((1+I_r)^x-1) --> 10/((1+10)^2-1)

Evaluating ... ...

S_a = 0.0833333333333333

STEP 3: Convert Result to Output's Unit

0.0833333333333333 --> No Conversion Required

FINAL ANSWER

0.0833333333333333 ≈ 0.083333 <-- Annual Sinking Fund

(Calculation completed in 00.004 seconds)

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Created by Chandana P Dev

NSS College of Engineering (NSSCE), Palakkad

Chandana P Dev has created this Calculator and 500+ more calculators!

Verified by Mithila Muthamma PA

Coorg Institute of Technology (CIT), Coorg

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< 17 Valuation Engineering Calculators

Annual Installment for Sinking Fund

Go Annual Installment = Sinking Fund*Rate of Interest/((1+Rate of Interest)^Number of Years Money is Invested-1)

Coefficient of Annual Sinking Fund

Go Coefficient of Sinking Fund = Rate of Interest/((1+Rate of Interest)^Number of Years Money is Invested-1)

Annual Sinking Fund using Sinking Fund Method

Go Annual Sinking Fund = Rate of Interest/((1+Rate of Interest)^Life of Asset in Years-1)

Percentage Rate of Annual Depreciation

Go Percentage Rate of Annual Depreciation = 1-(Scrap Value/Original Cost)

Years Purchase when Sinking Fund is Recovered

Go Years Purchase = 1/(Rate of Interest on Capital+Rate of Sinking Fund)

Rate of Sinking Fund given YP

Go Rate of Sinking Fund = (1/Years Purchase)-Rate of Interest on Capital

Coefficient of Annual Sinking Fund given Sinking Fund

Go Coefficient of Sinking Fund = Annual Installment/Sinking Fund

Annual Installment given Sinking Fund

Go Annual Installment = Coefficient of Sinking Fund*Sinking Fund

Sinking Fund for Buildings

Go Sinking Fund = Annual Installment/Coefficient of Sinking Fund

Capitalized Value using Profit Based Valuation

Go Capitalized Value = Net Rental Income*Years Purchase

Capitalized Value

Go Capitalized Value = Net Rental Income*Years Purchase

Gross Rent given Net Rent in Rental Method

Go Gross Rent = Net Rental Income+Outgoings of Repairs

Net Rent using Rental Method of Valuation

Go Net Rental Income = Gross Rent-Outgoings of Repairs

Outgoings using Rental Method

Go Outgoings of Repairs = Gross Rent-Net Rental Income

Net Income using Profit Based Valuation

Go Net Income = Gross Income-Outgoings of Repairs

Rate of Interest given Years Purchase

Go Rate of Interest = 100/Years Purchase

Years Purchase

Go Years Purchase = 100/Rate of Interest

Annual Sinking Fund using Sinking Fund Method Formula

Annual Sinking Fund = Rate of Interest/((1+Rate of Interest)^Life of Asset in Years-1)
S_a = I_r/((1+I_r)^x-1)

What is the Purpose of a Sinking Fund?

A sinking fund is a strategic way to save money by setting aside a little bit each month. Sinking funds work like this: Every month, you'll set money aside in one or multiple categories to be used at a later date. With a sinking fund, you save up a small amount each month for a certain block of time before you spend.

What are the Advantages of a Sinking Fund?

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 Annual Sinking Fund using Sinking Fund Method?

Annual Sinking Fund using Sinking Fund Method calculator uses Annual Sinking Fund = Rate of Interest/((1+Rate of Interest)^Life of Asset in Years-1) to calculate the Annual Sinking Fund, The Annual Sinking Fund using Sinking Fund Method formula is defined as an account containing money set aside to pay off a debt or bond. A company that issues debt will need to pay that debt off in the future, and the sinking fund helps to soften the hardship of a large outlay of revenue. Annual Sinking Fund is denoted by S_a symbol.

How to calculate Annual Sinking Fund using Sinking Fund Method using this online calculator? To use this online calculator for Annual Sinking Fund using Sinking Fund Method, enter Rate of Interest (I_r) & Life of Asset in Years (x) and hit the calculate button. Here is how the Annual Sinking Fund using Sinking Fund Method calculation can be explained with given input values -> 0.083333 = 10/((1+10)^2-1).

FAQ

What is Annual Sinking Fund using Sinking Fund Method?

The Annual Sinking Fund using Sinking Fund Method formula is defined as an account containing money set aside to pay off a debt or bond. A company that issues debt will need to pay that debt off in the future, and the sinking fund helps to soften the hardship of a large outlay of revenue and is represented as S_a = I_r/((1+I_r)^x-1) or Annual Sinking Fund = Rate of Interest/((1+Rate of Interest)^Life of Asset in Years-1). The Rate of Interest is the percent of principal amount charged for the due period & Life of Asset in Years is the number of years the asset is expected to be used in its lifespan.

How to calculate Annual Sinking Fund using Sinking Fund Method?

The Annual Sinking Fund using Sinking Fund Method formula is defined as an account containing money set aside to pay off a debt or bond. A company that issues debt will need to pay that debt off in the future, and the sinking fund helps to soften the hardship of a large outlay of revenue is calculated using Annual Sinking Fund = Rate of Interest/((1+Rate of Interest)^Life of Asset in Years-1). To calculate Annual Sinking Fund using Sinking Fund Method, you need Rate of Interest (I_r) & Life of Asset in Years (x). With our tool, you need to enter the respective value for Rate of Interest & Life of Asset in Years and hit the calculate button. You can also select the units (if any) for Input(s) and the Output as well.

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