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DISCOUNTING TECHNIQUE is also called present value technique. It is the process of calculating the present value of cash flows. Discounting is determining the present value of a future amount. Present value is the current value of a future amount. That is in discounting; the present value of cash flows at a specified interest rate at the beginning of a specified period of time is calculated. This is the most essential concept in financial decision making. The present value (P) of a lump sum (F) occurring at the end of n period at i rate of interest is given by the equation
The present value factor can be found out by referring to the present value tables.
How do financial managers calculate the average tax rate? Financial managers calculate the average tax rate by dividing tax dollars paid by earnings before taxes (EBT).
Illustration Let us assume that Vishal Mehta & Co., (from Illustration 1) is using the following discounting rates in place of one rate:
Assets Pension insurance companies' assets can be divided into five main investment classes: cash, long-term bonds, stocks, property and loans. The total returns on the assets
QUASI-INSTRUMENTS These instruments are considered as debt instruments for a time-frame and are converted into equity at the option of the investor (or at company's option) aft
Suppose spot Swiss franc is $0.7000 and the six-month forward rate is $0.6950. What is the minimum price which a six-month American call option along with a striking price of $0.6
Question 1 Globalization is a process of international integration that arises due to increasing human connectivity as well as the interchange of products, ideas and other aspe
Q. Degree of uncertainty in predicting cash balances? Probability approaches identify a degree of uncertainty in predicting cash balances and allow for a range of outcomes to
Examples of ICQ's and ICEQ's ICQ: "Does an authorised senior person review purchase invoices before payment is made?" ICEQ: "Can payments be made on purchase invoices th
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What is meant by the terms that an option is in-, at-, or out-of-the-money? Answer: A call or put option with S t > E (E > S t ) is considered to as trading in-the-money. If
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