Present value of an annuity - dcf technique, Finance Basics

Assignment Help:

Present Value of an Annuity - DCF Technique

An individual investor may not necessarily acquire a lump sum after several years however rather obtain a constant periodic amount that is an annuity for specific number of years.  The current value of an annuity obtainable where the investor time preference is 10 percent equal to:

Pv (A) = A / (1+i)

I = time preference rate

As an example of 

Pv of 1/= to be obtained after 1 year if time preference rate is 10 percent.

1/ (1+0.1) = 0.909

After 2 years it will be: A / (1+i)2 = 1/(1.1)2 = 0.8264  

1st year    -        0.9090

2nd year   -        0.8264

3rd year    -        0.7513

4th year    -        0.6830

Total         -        3.1697


Related Discussions:- Present value of an annuity - dcf technique

Example of payback period method, Example of Payback Period Method Sup...

Example of Payback Period Method Suppose a project costs Sh.80,000 and will produce the following cash inflows as:                                  Cash inflows      Accumu

A+/a1, A+/A1 It is one of the top ratings that a ratings agency allots ...

A+/A1 It is one of the top ratings that a ratings agency allots to an issuer or insurer. This rating indicates that the security or carrier has steady financial backing and ple

Discuss possible reasons for the merger , Investigate a recent company merg...

Investigate a recent company merger or take-over and: i)  Critically evaluate the means by which managers may determine the bid price in such acquisitions. (You should use the b

Turnover ratios, Turnover Ratios Turnover Ratios/efficiency/asset mana...

Turnover Ratios Turnover Ratios/efficiency/asset management ratio Turnover ratio shows the efficiency along with that the firm utilized the asset or resources at its dispos

Oogenesis - gametogenesis, Oogenesis - Gametogenesis The maturing proc...

Oogenesis - Gametogenesis The maturing procedure in oogenesis leading to the formation of ovum begins before birth but is not completed until after puberty. The primary oocyte

Analyse the financial statements, Task The following inform...

Task The following information has been extracted from the accounts of R Ltd., a manufacturer and distributor of home cordless phone in Hong Kong.

Individual or component costs of capital, flotation cost of 15% for bond, b...

flotation cost of 15% for bond, bonds 8%,$1,000 par value, 16 year maturity

Describe briefly the term measures of variability, Question: (a) (i)...

Question: (a) (i) Define the term multicollinearity. (ii) Explain why it is important to guard against multicollinearity. (b) (i) Sometimes we encounter missing value

Sources of funds - finance, Sources of Funds - Finance Venture capital...

Sources of Funds - Finance Venture capital, with combining risk financing along with marketing assistance and management, could become an effective instrument in fostering dev

What is the process of investing in securities, What is the Process of Inve...

What is the Process of Investing in Securities ? There are several process of investing in securities:- (1) Finding a Broker (2) Selection of Brokers (3) Opening an Account w

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