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

Distribution under the intestacy provisions, DISTRIBUTION UNDER THE INTESTA...

DISTRIBUTION UNDER THE INTESTACY PROVISIONS When a person dies without leaving a will, his estate is distributed according to the Law of Succession Act. When a person dies, fou

Off balance sheet financing, Q. Off balance sheet financing? A finance ...

Q. Off balance sheet financing? A finance charter exists when the substance of the lease is that the lessee enjoys substantially all of the risks and rewards of ownership even

Describe the effects of each transaction on assets, KAM Computer Timeshare ...

KAM Computer Timeshare Company entered into the following transactions durnig May 2014 Decribe the effects of each transaction on assets, liabilities, and owner's equity. 1. Purcha

Inventory, HOW TO RECORD INVENTORY AT NET REALISABLE VALUE ON JOURNAL

HOW TO RECORD INVENTORY AT NET REALISABLE VALUE ON JOURNAL

Compute debt equity ratio and prepare a cash flow statement, 1.From the ...

1.From the following information you are required to prepare a cash Flow statement of XYZ Ltd for the year ended 31 st December 2009 LIABILITIES

Define return on capital employed, Q. Define Return on capital employed? ...

Q. Define Return on capital employed? Return on capital employed (ROCE) is as well called accounting rate of return. Distinctly IRR ROCE uses average annual accounting profit b

The statement of affairs-bankruptcy accounts, The Statement of Affairs ...

The Statement of Affairs The statement of affairs sets out: (a) The various assets of the debtor, at the values they are expected to realise; (b) The creditors, classified acc

Credit reference agencies and credit scoring, Q. Credit Reference Agencies ...

Q. Credit Reference Agencies and Credit Scoring ? A several organisations example Dun & Bradstreet and Standard & Poor provide credit scores and ratings for companies. These ma

Application information-executorship law and accounts, Application Informat...

Application Information The application must include information as to: The full name of the deceased; The death and place of his death; Whether or not the decease

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