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Unformatted text preview: Dr Loss CR Liability Disclose No disclosure Cannot estimate loss Disclose Disclose No disclosure TIME VALUE OF MONEY Simple interest Compound interest Present value= current value of amount to be received in future Future value= the value of an amount in the future PV = PV factor (n= number of period, i= interest rate) * payment FV = FV factor (n= number of period, i= interest rate) * payment Factors from appendix A Now Future Present value ? $1 Future value $1 ? Present Value Example Assume the relevant interest rate is 6%. Would you rather receive a. A payment of $1,000,000 today b. Payments of $150,000 at the end of each of the next 10 years c. A payment of $500,000 today and payments of $160,000 at the end of each of the next 5 years (Hint: Compare the present values)...
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This note was uploaded on 03/02/2012 for the course BUISNESS 230a taught by Professor Stanley during the Fall '08 term at Sonoma.
- Fall '08