Present value of an annuity, Financial Accounting

Assignment Help:

Let us assume you expect to obtain Rs.2000 yearly for the next three years. The receipt of Rs.2000 is evenly divided. One part that is: Rs.1000 is obtained at the beginning of the year and the remaining Rs.1000 is received on the end of the year. We are interested in understanding the present value while the discount rate is 10%. The cash flows declared above are of two types that are similar to annuity due and regular annuity. The present value of such cash flow is determined as follows:

a) Present value of Rs.1000 obtained at the end of each year for three years as Regular annuity.

Rs. 1000 (1/ 1.10) + Rs.1000 (1/ 1.10)2 + Rs.1000 (1/ 1.10)3

= (1000 * 09091) + (1000 * 08264) + (1000 + 0.7513)

= Rs.2479.

b) Present value of Rs.1000 obtained at the starting of each year for three yearas annuity due

= Rs. 1000 + Rs. 1000 (1/ 1.10) + Rs.1000 (1/ 1.10)2

= 1000 + (1000 * 09091) + (1000 + 08264)

= Rs.2735

The present value of such annuity = Rs. 2479+Rs.2735 = Rs. 5214.


Related Discussions:- Present value of an annuity

Irs, I am looking for the solutiotns to this problem. Using the informat...

I am looking for the solutiotns to this problem. Using the information provided below, complete Aspen Ridge limited partnership%u2019s page 1 of Form 1065; complete Schedule K o

Earnings and dividends per equity share, Whereas dividend may be of prime s...

Whereas dividend may be of prime significance to some equity shareholders, this may not be so for the other shareholders. Several shareholders may be interested in receiving a usua

Student, Open "Hoyle CPA: Earnings Per Share." Under "Free Questions" selec...

Open "Hoyle CPA: Earnings Per Share." Under "Free Questions" select "Financial Accounting & Reporting."

Example on financial and managerial accounting, Mr N. M. is lucky to have a...

Mr N. M. is lucky to have a lottery prize of Rs 20 million. He does not have any liability and does not have any claimant over this money. He has the following alternatives: (i)

Basics of sundry matters, Basics of Sundry Matters Current accounts...

Basics of Sundry Matters Current accounts balances must always be equal and opposite. The head office current account in the branch books should always have a credit bal

Managing organisations with multiple objectives, The difficulties associate...

The difficulties associated with managing organisations with multiple objectives To the level that an organisation faces a range of stakeholders then they also face multiple ob

Calculate the profit maximization, Complete the table and use the informati...

Complete the table and use the information to determine profit maximization or loss minimization. 1. Complete the table Normal 0 false false false EN-I

Market value of the entire corporation, Company X is presumably doing well....

Company X is presumably doing well. The corporation's balance sheet last September 31 can be summarized as follows: Total Assets

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