Shorter discounting periods, Financial Accounting

Assignment Help:

Occasionally cash flows may have to be discounted more often than once a year semi- monthly, daily, annually or quarterly.  The outcome of this is as fold

(i)  The number of periods raises

(ii) The discount rate applicable per period reduces.  The formula for computing the present value in case of shorter discounting period is:

PV = FVn [1/(1 + k/m)]n/m 

Here m = number of times per year discounting is done.

Illustration: Compute the present value of Rs. 10,000 to be obtained at the end of 4 years.  The discount rate is 10% and discounting is done quarterly.

Solution:

PV = FV4 . PVIF k/m, m.n

= 10,000 . PVIF 3%, 16

= 10,000. 0.623

= Rs. 6230


Related Discussions:- Shorter discounting periods

Accounting equation, Can anyone here help me in this question ?? Kindly tel...

Can anyone here help me in this question ?? Kindly tell how can we solve it Mr. “A” starts a new business. Before to start the business operation, he has purchased vehicle Rs. 1,

Relationship between cash or call asset-or-nothing, Options with discontinu...

Options with discontinuous payoffs are called Binary options. An example is the cash-or-nothing callwhich pays nothing if the stock price at the maturity of the option is below the

Landlord''s right of distress-bankruptcy, LANDLORD'S RIGHT OF DISTRESS ...

LANDLORD'S RIGHT OF DISTRESS The Landlord's right to distrain for arrears of rent is not lost on the tenant's bankruptcy, but 1) Distress can only be levied after commencement

Discounting the terminal value, The Major Assignment Business Case Study is...

The Major Assignment Business Case Study is about American Cable Communications' proposed acquisition of the firm Air Thread Connections. The case study is available from the folde

Departmental accounts, please help me on the current lay out of the departm...

please help me on the current lay out of the departmental accounts

Illustration of consolidated balance sheet, Illustration of consolidated ba...

Illustration of consolidated balance sheet H Ltd owned S Ltd since the date of incorporation of S Ltd. The balance sheets of the two  companies as at 31 December 20X2 is as fo

Conditions of a will-executorship laws and accounts, Conditions of a will ...

Conditions of a will A written will is not valid unless it fulfills the following conditions. 1) The testator must sign the will; or he must affix his mark to the will (i.e. a

Business risk in company, Q. Business risk in company? Business risk is...

Q. Business risk in company? Business risk is the likelihood of a company experiencing changes in the level of its profit before interest as a result of changes in turnover or

Format for balance sheet, FORMAT FOR BALANCE SHEET The non current asse...

FORMAT FOR BALANCE SHEET The non current assets, current assets and current liabilities sections remain identical to those of a sole proprietorship.  However, the “capital sect

Determine the amount of translation adjustment, Alliance Corporation (an Au...

Alliance Corporation (an Australian company) invests 1,000,000 marks in a foreign subsidiary on January 1, Year 1. The subsidiary commences operations on that date, and generates n

Write Your Message!

Captcha
Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd