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

Stockholders equity changed, On May 1, 2010, Ziek Corp. declared and issued...

On May 1, 2010, Ziek Corp. declared and issued a 10% common stock dividend. Prior to this dividend, Ziek had 100,000 shares of $1 par value common stock issued and outstanding. The

Agreements to settle property-bankruptcy and liquidation, Agreements to set...

Agreements to settle property The trustee is not bound by such an agreement if it remains executory. If property has already been settled, the trustee can recover it unless it

What is the present value index for each proposal, The net present value ha...

The net present value has been computed for Proposals A and B. proposal A proposal B invested amount 75000 125000 total present value of cash 84000 136250 net present value 9000 11

What will be the percentage of return on investment, 1. A stock sells for $...

1. A stock sells for $10 a share. you purchase 100 shares for $1000 and after a year, the prices rises to $17.50. What will be the percentage of return on your investment if you bo

Provide doubtful debt , provide 5% for doubtful debt what is the journal en...

provide 5% for doubtful debt what is the journal entry

Trustees right to be indemnified-trusts laws and accounts, Trustees right t...

Trustees right to be indemnified Trustees have, however, a right to be indemnified: 1. Out of trust property, for all expenses properly incurred in the execution of the tru

Reason for incorporating statements into annual reports, what is the reason...

what is the reason of incorporating 1. corporate governance statement 2. audit committee statement 3. internal audit statement into annual reports?

VAT, EXAMPLES OF HOW VAT SYSTEM WORKS

EXAMPLES OF HOW VAT SYSTEM WORKS

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