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

Abraham maslow''s hierarchy of needs theory, Motivation is said to be an in...

Motivation is said to be an internal state that energises an individual to engage in certain types of behaviours. This process is triggered when the individual experiences certain

Construct the market value balance sheet, Construct the Market Value Balanc...

Construct the Market Value Balance Sheet XYZ, Inc., another company founded by Larry Davidson in 2005, is currently entirely equity financed. That means the company carries no

Solutions, I see a question posted. I can I be sure the problem has been s...

I see a question posted. I can I be sure the problem has been solved. I tried calling your number but I got no answer

Advise the directors of the entity, An entity had the following transaction...

An entity had the following transactions during the year ended 31 December 2010: The entity invested in a convertible bond on its issue date. The bond matures four years aft

Department accounting, In the spring of each year, Steinbrook College's the...

In the spring of each year, Steinbrook College's theater department puts on a contemporary play. Before the performance, the theater manager instructs student volunteers in their d

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

Limitations of the five year period of analysis, Q. Limitations of the five...

Q. Limitations of the five year period of analysis? A number of restrictions to the analysis potentially arise - The approach doesn't take account of future benefits/costs a

Mutual dealings-bankruptcy and liquidation, MUTUAL DEALINGS A right of ...

MUTUAL DEALINGS A right of set-off is allowed where there have been - (a) Mutual credits, debts or other dealings resulting in pecuniary liabilities, (b) Between the debtor an

Different powers of investment-trust laws and accounts , Powers of investme...

Powers of investment 1. Shares and debentures:  A trustee may: Invest in bearer securities if these would otherwise be authorised;    Acquiesce in an amalgamation

Determine straight value and conversion value , Banana Computer has a perpe...

Banana Computer has a perpetual, convertible 7% annual coupon bond outstanding. The bond has a face value of $1,000 and has a conversion price of $40. The required return on an oth

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