Please, I need a little help accountants.

[Cory MBA]

Future value is the value of an asset at a specific date. In this problem, we have three payments of $10m, $10m, and $110m. Now these values are nominal - it's three separate future values because it's three different dates. Lumping them together and talking about a single total future value of $130m is thus totally nonsensical.

The PV of the first payment is $10m/1.1 = $9.1m
The PV of the second payment is $10m/(1.1^2) = $8.3m
The PV of the final payment is $110m/(1.1^3) = $82.6m
The sum of these is $100m, which is the correct PV of the payments in this problem.

Whoever earlier said to calculate the PV of an annuity at $10m and the PV of three year future value $100m was correct. You then solve the problem with three calculations instead of four above in my solution, the purpose of which was merely to illustrate my point.

Now using the PV of these payments you could also calculate a FV at any other date, say five years from now at a specified interest rate. But this has nothing to do with the problem at hand.

Cory MBA got it correct, and I hope I made it more clear.

Thank you.

 

[Brown_Pride]

Future Value wasn't being asked in the scenario presented...but Present Value was being sought.

Since that was the case, I went to Excel and used the PV function. There are a few ways to use that function in Excel, depending on the information given in the scenario. We had time periods, annuity amounts, an interest rate, and a lump sum payment.

yeah i see your and Nasimiento's point now. I read teh 130 as the FV but it never technically states that as the fv but rather the total of payments so i see where I fuked up on that.

in excel you used pv(.1,3,10m,100m)

what is the justification for using the 100m in the fv situation? I see where it works out even when the 100m is changed and you manually calc for the pv but i don't think i've ever seen where you use that 100m as the fv value?...though it does work out for all instances of a change in lump sum...

 

[Cory MBA]

yeah i see your and Nasimiento's point now. I read teh 130 as the FV but it never technically states that as the fv but rather the total of payments so i see where I fuked up on that.

in excel you used pv(.1,3,10m,100m)

what is the justification for using the 100m in the fv situation? I see where it works out even when the 100m is changed and you manually calc for the pv but i don't think i've ever seen where you use that 100m as the fv value?...though it does work out for all instances of a change in lump sum...

You would use Future Value of $100M if you were were being asked a question like this:

"How much would $100M be worth in 10 years, at 9%."

 

[Dooby]

The answer is actually 99,999,000.

I had the answer all along but it asks you to show the steps on how to get to that answer.

I keep seeing 100,000,000 though

 

[Cory MBA]

The answer is actually 99,999,000.

I had the answer all along but it asks you to show the steps on how to get to that answer.

I keep seeing 100,000,000 though

 

[Nascimento]

The answer is actually 99,999,000.

I had the answer all along but it asks you to show the steps on how to get to that answer.

I keep seeing 100,000,000 though

Probably rounding errors. Enter the correct input in a calculator or Excel and you'll get exactly $100m.

 

[Mountain]

The answer is actually 99,999,000.

I had the answer all along but it asks you to show the steps on how to get to that answer.

I keep seeing 100,000,000 though

nikka how did you arrive at that?

 

[Mountain]

Future value is the value of an asset at a specific date. In this problem, we have three payments of $10m, $10m, and $110m. Now these values are nominal - it's three separate future values because it's three different dates. Lumping them together and talking about a single total future value of $130m is thus totally nonsensical.

You're making this more complicated than it is, the FV (in total, as required by the PV formula) of any agreement, or investment, is the aggregation of the expected incomes, basically the total return of the investment, which in this case is $130'000'000 as explained by me and Pride already.

The PV of the first payment is $10m/1.1 = $9.1m
The PV of the second payment is $10m/(1.1^2) = $8.3m
The PV of the final payment is $110m/(1.1^3) = $82.6m
The sum of these is $100m, which is the correct PV of the payments in this problem.

PV = FV/(1+R)^N

Again, you're making this more complicated than it is. The discount rate is 10% per anum, the total future (or expected) value of the contractual agreement as explained countless times already is 130'000'000, and the FV as you can see is a sum figure, the equation doesnt require separate inputs of expected cash flow, so:

Current value = present value

PV = fvn/ (1+r)^n

PV = 130'000'000/ (1+0.1)^3

PV = 130'000'000 / 1.331

PV = 97670924.11

The current value of the contract = $97'670'924.11

Whoever earlier said to calculate the PV of an annuity at $10m and the PV of three year future value $100m was correct. You then solve the problem with three calculations instead of four above in my solution, the purpose of which was merely to illustrate my point.

Cory MBA got it correct, and I hope I made it more clear.

Here we go again

yeah i see your and Nasimiento's point now. I read teh 130 as the FV but it never technically states that as the fv but rather the total of payments so i see where I fuked up on that.

nikka dont just fold your hand for the sake of folding, the future value is 130'000'000, the future value is the sum of all incomes receivable in regards to the agreement in question.

in excel you used pv(.1,3,10m,100m)

How? The total future value of the contractual agreement is not 100m, I thought you understood this?

what is the justification for using the 100m in the fv situation? I see where it works out even when the 100m is changed and you manually calc for the pv but i don't think i've ever seen where you use that 100m as the fv value?...though it does work out for all instances of a change in lump sum...

Man, there is non.

 

[Dooby]

nikka how did you arrive at that?

It's actually a homework problem. They supply the answer but we must show the steps on how to come to that answer, which is 99,999,000.

 

[Mountain]

It's actually a homework problem. They supply the answer but we must show the steps on how to come to that answer, which is 99,999,000.

What formula are they teaching you at the minute, or have taught you recently, is it the PV formula?

 

[Mountain]

Future Value wasn't being asked in the scenario presented...but Present Value was being sought.

Since that was the case, I went to Excel and used the PV function. There are a few ways to use that function in Excel, depending on the information given in the scenario. We had time periods, annuity amounts, an interest rate, and a lump sum payment.

=PV(0.10,3,10000000,100000000)

PV = FV / (1+R)^N

How can you calculate the PV (present value) variable without the FV (future value) variable?

 

[Cory MBA]

PV = FV / (1+R)^N

How can you calculate the PV (present value) variable without the FV (future value) variable?

Wolf - I don't even do these by hand anymore. Excel does the thinking. The scenario just has to be understood and set up properly.

In this case - FV is a non-factor and does not need to be used...

 

[Mountain]

Wolf - I don't even do these by hand anymore. Excel does the thinking. The scenario just has to be understood and set up properly.

In this case - FV is a non-factor and does not need to be used...

Edit: In fact, I know the problem now.

 

[Nascimento]

You're making this more complicated than it is, the FV (in total, as required by the PV formula) of any agreement, or investment, is the aggregation of the expected incomes, basically the total return of the investment, which in this case is $130'000'000 as explained by me and Pride already.



PV = FV/(1+R)^N

Again, you're making this more complicated than it is. The discount rate is 10% per anum, the future (or expected) value of the contractual agreement as explained countless times already is 130'000'000, and the FV as you can see is a sum figure, the equation doesnt require separate inputs of expected cash flow, so:





Here we go again



nikka dont just fold your hand for the sake of folding, the future value is 130'000'000, the future value is the sum of all incomes receivable in regards to the agreement in question.



How? The total future value of the contractual agreement is not 100m, I thought you understood this?



Man, there is non.

Homie, I don't know what to tell you except point out your lack of understanding the time value of money. You can't sum up money from different dates to a single value, because year 1 dollars are not equivalent to year 2 dollars. This is basic stuff.

Like Cory said if you understand the scenario and what's going on, you can calculate this in a multitude of ways and arrive at the correct answer.

Dooby, the dude who gave that answer (99,999,000) is an idiot who has no business teaching. It's obvious to me that he has provided the incorrect answer due to rounding errors. But if you take my word for it then here's an opportunity for you to shine tho

edit: "idiot" directed at Dooby's teacher, not Wolf

 

[Robbie3000]

BTW this is a Finance question not Accounting.