Question
In: Finance
Present Value and Discounting What do we mean by the present value of an investment? The...
Present Value and Discounting
- What do we mean by the present value of an investment?
- The process of discounting a future amount back to the present is the opposite of doing what?
- What do we mean by discounted cash flow, or DCF, valuation?
Solutions
Expert Solution
A. Present value of an investment will mean that the value of future stream of the cash flows associated with the investment will be discounted at the present in order to find out the overall value of the investment at the present value so it will be impacting the time value of the money in order to find out the current value by discounting the cash flows
B. The process of discounting a future amount back to the present is the opposite of compounding It back to the Future so compounding is related to oo compounding of the present value of the cash flows at the future date and it is known as the future value
C. Discounted cash flow valuation is a valuation technique in which all the cash flows associated with the future of the company is discounted at the present in order to find out the share price of the company and valuation method can be associated with other assets as well in order to find out the discounting of future cash flows that the present value in order to derive the value of the security.
jeff jeffy answered 2 years agoRelated Solutions
Future Value and Compounding What do we mean by the future value of an investment? What...
Future Value and Compounding
What do we mean by the future value of an investment?
What does it mean to compound interest? How does compound
interest differ from simple interest?
The present value of an investment must be computed by discounting cash flows at the internal...
The present value of an investment must be computed by
discounting cash flows at the internal rate of return.
True
False
In finance, what do we mean by the time value of money? How do we calculate it?
In finance, what do we mean by the time value of money? How do we calculate it?
PRESENT VALUE OF AN ANNUITY Find the present values of these ordinary annuities. Discounting occurs once...
PRESENT VALUE OF AN ANNUITY
Find the present values of these ordinary
annuities. Discounting occurs once a year. Round your answers
to the nearest cent.
$700 per year for 16 years at 6%.
$
$350 per year for 8 years at 3%.
$
$800 per year for 6 years at 0%.
$
Rework previous parts assuming that they are annuities
due. Round your answers to the nearest cent.
$700 per year for 16 years at 6%.
$
$350 per year...
PRESENT VALUE OF AN ANNUITY Find the present values of these ordinary annuities. Discounting occurs once...
PRESENT VALUE OF AN ANNUITY
Find the present values of these ordinary
annuities. Discounting occurs once a year. Round your answers
to the nearest cent.
$600 per year for 16 years at 12%.
$
$300 per year for 8 years at 6%.
$
$900 per year for 16 years at 0%.
$
Rework previous parts assuming that they are annuities
due. Round your answers to the nearest cent.
$600 per year for 16 years at 12%.
$
$300 per year...
The process of determining the present value is referred to as discounting the future amount. True...
The process of determining the present value is referred to as
discounting the future amount.
True
False
Multiple Choice Question 13
If $36000 is put in a savings account paying interest of 8%
compounded annually, what amount will be in the account at the end
of 7 years?
$61698
$56780
$28878
$56160
Multiple Choice Question 19
If $37000 is deposited in a savings account at the end of each
year and the account pays interest of 5% compounded annually, what...
mergers & Acquisitions 1. what do we mean by passive investment? What are the impacts of...
mergers & Acquisitions
1. what do we mean by passive investment? What are the impacts of
passive investments on the balance sheet and the income
statement?
2. Accounting for inter-corporate investment under the equity
method, and the Equity method impact on the ROE.
3. the basic rules for consolidation, accounting for
non-controlling interests (minority interests).
4. difference between fair value hedge vs. cash flow hedge and
impact of each hedge on the income statement.
5. Accounting equity carve-out: sell-off, spin-off,...
when we talk about discounting future cash flows, what exactly does that mean? what is the...
when we talk about discounting future cash flows, what
exactly does that mean? what is the purpose of discounting cash
flows?
What is the net present value of this investment? INITIAL COST
What is the net present value of this
investment?
INITIAL
COST $500,000
PROJECT
LIFE 15
years
SALVAGE
VALUE $
20,000
ANNUAL NET CASH
FLOWS $120,000
DISCOUNT
RATE 15
%
a. $
203,684
b. $
204,142
c. $
205,669
d. $
206,263
e. $
208,721
What do we mean by sales promotion? Does this add value or take it away?
What do we mean by sales promotion? Does this add value or take
it away?
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