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How do you compute the profitability index of a capital-budgeting proposal?
Dividing the present value of the annual after-tax cash flows by the cost of the project
What is The process of calculating the present value of a future cash flow called?
The process of calculating the present value of a future cash flow is called discounting. This involves applying a discount rate to future cash flows to account for the time value of money, which reflects the principle that a dollar today is worth more than a dollar in the future. The present value is determined by dividing the future cash flow by (1 + the discount rate) raised to the power of the number of periods until the cash flow occurs. This calculation helps in assessing the worth of future cash flows in today's terms.
What is the present value of an asset?
The present value of an asset is the current worth of expected future cash flows generated by that asset, discounted back to the present using an appropriate discount rate. This calculation accounts for the time value of money, reflecting the principle that a dollar today is worth more than a dollar in the future due to its potential earning capacity. Present value is commonly used in finance for investment analysis and decision-making.
What accounting concept is valuation of promise to receive cash in the future at present cost?
The accounting concept that relates to the valuation of a promise to receive cash in the future at present cost is known as the "time value of money." This principle holds that a specific amount of money today is worth more than the same amount in the future due to its potential earning capacity. In accounting, this concept is applied through techniques like present value calculations, where future cash flows are discounted back to their present value using an appropriate discount rate. This approach helps in accurately assessing the worth of financial instruments and obligations.
How to compute after tax salvage value?
Salvage Value - [Tax * (Market Value - Book Value)
How is the future value of a mixed stream of cash flows calculated?
formula for future value of a mixed stream
What is value of money?
The time value of money is based on the premise that an investor prefers to receive a payment of a fixed amount of money today, rather than an equal amount in the future, all else being equal. In particular, if one received the payment today, one can then earn interest on the money until that specified future date. All of the standard calculations are based on the most basic formula, the present value of a future sum, "discounted" to the present. For example, a sum of FV to be received in one year is discounted (at the appropriate rate of r) to give a sum of PV at present. Some standard calculations based on the time value of money are: : Present Value (PV) of an amount that will be received in the future. : Present Value of a Annuity (PVA) is the present value of a stream of (equally-sized) future payments, such as a mortgage. : Present Value of a Perpetuity is the value of a regular stream of payments that lasts "forever", or at least indefinitely. : Future Value (FV) of an amount invested (such as in a deposit account) now at a given rate of interest. : Future Value of an Annuity (FVA) is the future value of a stream of payments (annuity), assuming the payments are invested at a given rate of interest. The time value of money is based on the premise that an investor prefers to receive a payment of a fixed amount of money today, rather than an equal amount in the future, all else being equal. In particular, if one received the payment today, one can then earn interest on the money until that specified future date. All of the standard calculations are based on the most basic formula, the present value of a future sum, "discounted" to the present. For example, a sum of FV to be received in one year is discounted (at the appropriate rate of r) to give a sum of PV at present. Some standard calculations based on the time value of money are: : Present Value (PV) of an amount that will be received in the future. : Present Value of a Annuity (PVA) is the present value of a stream of (equally-sized) future payments, such as a mortgage. : Present Value of a Perpetuity is the value of a regular stream of payments that lasts "forever", or at least indefinitely. : Future Value (FV) of an amount invested (such as in a deposit account) now at a given rate of interest. : Future Value of an Annuity (FVA) is the future value of a stream of payments (annuity), assuming the payments are invested at a given rate of interest.
Is the present value factor the exponent of the future value factor?
The present value factor is the exponent of the future value factor. this is the relationship between Present Value and Future Value.
How is the future value related to the present value of a single sum?
The present value is the reciprocal of the future value.
If the interest rate is 4 percent what is the present value of this stream of payments?
Present value of streams can be found by dividing the streams with 4 percent interest rate for example if stream is 100 then present value will be present value = 100 / .04
How do you define the value of value?
I need a answer how do you know when to use future value or present value and future value of a annuity and present value of annuity Please help
What effect do interest rates have on the calculation of future and present value How does the length of time affect future and present value How do these two factors correlate?
What effect do interest rates have on the calculation of future and present value, how does the length of time affect future and present value, how do these two factors correlate.
Is down payment considered as present value?
A down payment is not typically considered present value in financial terms. Present value refers to the current worth of a future sum of money or stream of cash flows, discounted at a specific rate. The down payment is an initial amount paid upfront to reduce the total loan amount, while present value calculations focus on future cash flows. However, the concept of present value can apply to the overall financing arrangement, including how the down payment affects future payment obligations.
How do you find future value of share if you have present of it?
F = Future value P = Present Value i = Intrest Rate n = no. of years Therefore, the formula for future value of present amount :- F= P (1+i)n
Future Value Calculator?
Future Value Calculator Use this calculator to determine the future value of an investment which can include an initial deposit and a stream of periodic deposits.
Present value of a future amount?
the current dollar value of a future amount
What is present value analysis?
Present value analysis is a financial technique used to evaluate the value of future cash flows by discounting them back to their current value. It takes into account the time value of money, allowing for better decision-making by comparing the present value of costs and benefits. The goal is to determine whether an investment or project is worth pursuing based on its potential return.
