Appendix I: Calculation of Present Value of Cost Savings
We demonstrate the method utilised in calculating the present value of cost savings
(PVCS) using an example where export credit is given by US to Egypt. In this example
PVCS is calculated when the term of repayment is greater than 180 days. A similar
approach was used to calculate PVCS when the period of repayment is 180 days, except
we use short term interest rate.
Step 1: Finding semi-annual payment (PMTUS) if borrowing in the US
EC = PMT
US = US
C ʌ'ʌ
1(1+⅛ )n J
rUS
PMT = EC
PMTUS = ECUS
rUS
( ʌ]
l(1 + rus)n J
where ECUS is export credit given by US to Egypt, iUSis the interest rate in the US , n is
term of repayment (semi-annual payment for 2 periods or 12months) and
rus = —us—,n = 2
US n*100
Step 2: Finding the future value (FVuS) of the credit under uS borrowing
FV = PMT
uS = uS
(1 + ruS )n - 1
r
ruS
Step 3: Finding semi-annual payment (PMTEC) if borrowing in Egypt
37
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