{[ promptMessage ]}

Bookmark it

{[ promptMessage ]}

Present Value - -this method is used when periodic cash...

Info iconThis preview shows page 1. Sign up to view the full content.

View Full Document Right Arrow Icon
- Present Value: the value now of a given amount to be paid or received in the future, assuming compound interest. - Discounting the future amount: process used to determin the present value. - Present value = future value / (1+ i) ^ n - Ex: 1000 discounted at 10 percent for one year o PV = 1000 / (1+.1)^1 - present value of annuity: value now of a series of future receipts or payments, discounted assuming compound interest. - When computing present value of annuity. Necessary to knw o 1: discount rate o 2: number of discount periods o 3: amount of periodic receipts or payments
Background image of page 1
This is the end of the preview. Sign up to access the rest of the document.

Unformatted text preview: -this method is used when periodic cash flows are not the same each period-when future receipts are the same in each period, annuity table can be used. -When semiannual, you double periods and halve the discount rate. Computing present value of a long term note or bond-this is a function of payment amounts, length of time until payments are made, and the discount bond-ex: issue a 5 year bond-to find out the amount fo be paid, you must figure out series of interest payments (an annuty) and a single sum or the principal amount. -...
View Full Document

{[ snackBarMessage ]}

Ask a homework question - tutors are online