Question

Define and describe present value of money and future value of money. How is the discount...

Define and describe present value of money and future value of money. How is the discount formula used with each?
Business   Economics   
0 0
Add a commentTranscribed image text
Next >

Homework Answers

Answer #1

Present value is the concept that states an amount of money today is worth more than that same amount in the future. In other words, money received in the future is not worth as much as an equal amount received today. Receiving $1,000 today is worth more than $1,000 five years from now

Future value is the value of an asset at a specific date. It measures the nominal future sum of money that a given sum of money is "worth" at a specified time in the future assuming a certain interest rate, or more generally, rate of return; it is the present value multiplied by the accumulation function.

DISCOUNT FORMULA

NPV = F / [ (1 + r)^n ] where, PV = Present Value, F = Future payment (cash flow), r = Discount rate, n = the number of periods in the future.

Future value= P(1+i)^n

0 0
Know the answer?
Your Answer:

Post as a guest

Your Name:

What's your source?

Earn Coins

Coins can be redeemed for fabulous gifts.

Log In

Sign Up

Not the answer you're looking for?
Ask your own homework help question
Similar Questions
The Dividend-Discount Model of stock valuation: A) Is an application of the net present value formula....
The Dividend-Discount Model of stock valuation: A) Is an application of the net present value formula. B) Takes the net present value of expected dividends and add it to the future sale price of the stock. C) Takes the net present value of the expected future price of the stock and add the annual dividend. D) Takes the annual dividend, adds it to the expected future selling price and divides by the number of years to get the current price.
​​​​​​ Explain the following terms: Time value of Money Present Value Future Value Annuity Differential annuity
​​​​​​ Explain the following terms: Time value of Money Present Value Future Value Annuity Differential annuity
Describe how to use the net present value or present discounted value computation formula to determine...
Describe how to use the net present value or present discounted value computation formula to determine whether to invest in a 4-year college degree, given a high school diploma. Show how the costs of a college degree have two major components.
Think of a future form of money to be used in the us. Describe a form...
Think of a future form of money to be used in the us. Describe a form of fiat money that could be used that’s different than bill and coin currency. Explain how your idea fits 1 function and 1 characteristics of money?
How do we define the past, present and future of a given event in space-time diagram?
How do we define the past, present and future of a given event in space-time diagram?
I was just wondering how the present value of future cash flows and discount at 10%...
I was just wondering how the present value of future cash flows and discount at 10% columns were calculated in this problem: At the end of 2012, you forecast the following cash flows (in millions) for a firm with net debt of $759 million: 2013 2014 2015 Cash flow from operations $1,450 $1,576 $1,718 Cash investment 1,020 1,124 1,200 You forecast that free cash flow will grow at a rate of 4 percent per year after 2015. Use a required...
1. Explain the difference between present value(PV) and future value(FV) and how these two concepts are...
1. Explain the difference between present value(PV) and future value(FV) and how these two concepts are applied in the financial world. 2.explain the meaning of time value of money in regard to finance.
1. The future value of a present sum increases as either the discount rate or the...
1. The future value of a present sum increases as either the discount rate or the number of periods per year increases, other things held constant. True or False 2.It is always desirable to have a higher compounding frequency, regardless of the initial investment or the time horizon. True or False 3.A perpetuity is a level stream of evenly spaced cash flows that never ends. True or False
2. Define M1 and M2 3. Describe the money multiplier and explain how it works.
2. Define M1 and M2 3. Describe the money multiplier and explain how it works.
Future value is the value today of money at a future point in time. For example...
Future value is the value today of money at a future point in time. For example take a $10 investment that would grow to $100 in five years. The future value of that $10 investment is $100. It is the value today of money tomorrow. It is calculated based on the amount of money, the amount of time (in years) into the future and a given monthly interest rate. Create a method with three parameters that computes future investment using...
ADVERTISEMENT
Need Online Homework Help?

Get Answers For Free
Most questions answered within 1 hours.

Ask a Question
ADVERTISEMENT