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

Form-express trusts-trust laws and accounts, Form No special form is no...

Form No special form is normally required for the creation of a trust except that a declaration of trust respecting land or any interest therein must be manifested and proved b

Describe the diversification benefit, A)  A portfolio's daily changes have ...

A)  A portfolio's daily changes have a standard deviation of $15 million. Suppose the daily changes in the portfolio's value have a first order serial correlation of 0.25. Calculat

Primary restriction of making demand, Q. Primary restriction of making dema...

Q. Primary restriction of making demand? The primary restriction of making demand forecasts lies in the fact that they are forecasts and hence their reliability is unknown. Mos

What two components are used to compute the return on assets, What two comp...

What two components are used to compute the return on assets ?

Complete the cash flow spreadsheet, This lab assignment will correspond to ...

This lab assignment will correspond to developing a cash flow budget with an operating loan. There is on lab exercise listed below. Additionally, there are two assignment questions

Investment of accumulated income-trusts laws and accounts, Investment of ac...

Investment of accumulated income The income accumulations must be invested from time to time and the investments earmarked as being on Accumulations Account. The income aris

Homework help, I am needing homework help on my Principles to Accounting 1,...

I am needing homework help on my Principles to Accounting 1, but don''t know how much you guys charge

What is cs optimal decision, Copper Suppliers, Inc. (CS), is a distributor ...

Copper Suppliers, Inc. (CS), is a distributor of commercial grade copper. CS purchases copper directly from copper mines and then after refining it, sells the refined copper to in

Reserve requirement , 2(i). If all depositors tried to convert their deposi...

2(i). If all depositors tried to convert their deposits into cash at once, they would find that there are not sufficient reserves in the system to permit all of them to do this at

The adjusting entry, The company pays its employees at the end of the day F...

The company pays its employees at the end of the day Friday for work done during that five-day work-week. Total wages for a week are $16,000. In the current year, December 31 occur

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