Please, I need a little help accountants.

[VerbalIntercourse]

This is a very simple cap. Bgt. problem.

How this grew to 3 pages of bullshyt is amazing.

there are two lines here.

pv of and anuity (end of period, 3 years, 10%,10m)=Y
PV (3 years, 100m, 10%)=F

F + Y= PV of contract pay out.

The end.

 

[VerbalIntercourse]

BTW this is a Finance question not Accounting.

its a cost accounting capital budget problem .

 

[Mountain]

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.

nikka I know about the time value of money

Dooby, the dude who gave that answer 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

No need for that man , hold on though, let me finish this sht then get back to ya'll. I think i know where the problem lies on your side.

 

[Robbie3000]

its a cost accounting capital budget problem .

PV and Capital Budgeting were covered under finance in my MBA program.

 

[Sensitive Blake Griffin]

It's done that way to make ensure the student can recognize the relevant facts to solve a problem. If the student has a thorough understanding, he will see the nuances.

In this case, the answer is clean and simple...but can look complicated if you factor in unnecessary information.

I'm coming to you if I need help breh. Accounting for not for profit organizations already kicking my ass

 

[Cory MBA]

I'm coming to you if I need help breh. Accounting for not for profit organizations already kicking my ass

Just post it in here and let us all try to help. There's some good minds in here.

 

[Mountain]

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

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...

Alright, this is the problem:

We've both used diffrent discounting methods.

Pride and I used the standard present value formula to calculate the PV:

Whilst Cory and Nascimento used the cumulative present value formula below to work out the cumulative PV:

The standard present value of the contract = $97'670'924.11

The cumulative present value of the contract = $100'000'000

They are both correctly calculated, and they both represent a form of present value, but one calculates the cumulative PV whilst the other calculates the standard PV.

Now since the question does not ask for the cumulative PV, I can only assume that they want the standard PV, therefore I think the answer Pride and I provided is correct.

As for the answer they gave you Doobie, breh, I don't even know

 

[Cory MBA]

Alright, this is the problem:

We've both used diffrent discounting methods.

Pride and I used the standard present value formula to calculate the PV:

Whilst Cory and Nascimento used the cumulative present value formula below to work out the cumulative PV:

The standard present value of the contract = $97'670'924.11

The cumulative present value of the contract = $100'000'000

They are both correctly calculated, and they both represent a form of present value, but one calculates the cumulative PV whilst the other calculates the standard PV.

Now since the question does not ask for the cumulative PV, I can only assume that they want the standard PV, therefore I think the answer Pride and I provided is correct.

As for the answer they gave you Doobie, breh, I don't even know

Good work and explanation. I knew you were not simply imagining things.

For general testing purposes, I think it's implied that the cumulative method is being used. It's a perfect Excel problem. It would take some thought for me to arrive at the standard methods solution. I am not acquainted with it.

Herman Cain may have given Dooby the third solution.

 

[TYBG]

*subscribes thread*

coli should have a hw forum

 

[Mountain]

Good work and explanation. I knew you were not simply imagining things.

This nikka

For general testing purposes, I think it's implied that the cumulative method is being used. It's a perfect Excel problem. It would take some thought for me to arrive at the standard methods solution. I am not acquainted with it.

To tell the truth, I cant be bothered to think anymore so

Herman Cain may have given Dooby the third solution.

Spoiler

Really though, Doobie you need to be careful, because external examiners don't care if you've got a fck ass teacher or not, they'll mark you down if your answers aint hittin right.

So you need to verify the all your answer sheets if your teachers ain't worth shyt.

 

[Brown_Pride]

well i sent this question to 3 cpa's and 4 other people with MBA"s and basically the following:

Dooby your answer is a piss poor approximation at best
Depending on how you want to read the question either answer is theoretically correct as Wolf pointed out there's a couple ways to do this.

Using excel...there are also a couple of ways to do this so really.
FUK ACCOUNTING.

My favorite accounting quote from a college professor I had: "Accounting is not an exact science" -

 

[Nascimento]

Alright, this is the problem:

We've both used diffrent discounting methods.

Pride and I used the standard present value formula to calculate the PV:

Whilst Cory and Nascimento used the cumulative present value formula below to work out the cumulative PV:

The standard present value of the contract = $97'670'924.11

The cumulative present value of the contract = $100'000'000

They are both correctly calculated, and they both represent a form of present value, but one calculates the cumulative PV whilst the other calculates the standard PV.

Now since the question does not ask for the cumulative PV, I can only assume that they want the standard PV, therefore I think the answer Pride and I provided is correct.

As for the answer they gave you Doobie, breh, I don't even know

Wrong. You are calculating the PV of a one-time payment of $130m in year 3, which is not the problem in the question!

The two formulas you provide are one and the same. The "cumulative formula" is generalized in order to account for different FVs at different dates t. Which is precisely the point I'm trying to get across to you, that you can't add the payments into a single value as you do. They yield different answers because they are calculations of different payment scenarios.


Brown_Pride, I'm sorry but that's bullshyt. There is one correct solution here, and I have provided ample explanations why this is the case.

 

[Brown_Pride]

Wrong. You are calculating the PV of a one-time payment of $130m in year 3, which is not the problem in the question!

The two formulas you provide are one and the same. The "cumulative formula" is generalized in order to account for different FVs at different dates t. Which is precisely the point I'm trying to get across to you, that you can't add the payments into a single value as you do. They yield different answers because they are calculations of different payment scenarios.


Brown_Pride, I'm sorry but that's bullshyt. There is one correct solution here, and I have provided ample explanations why this is the case.

10m/1.1+10m/1.1^2+110m/1.1^3

that's what i'm going with.

Again only because I see the issue with the 130m FV the way the question is written and this is for school so i'm going with the academic answer.

 

[Dooby]

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

We refer to a PV/FV/ chart.

 

[Cory MBA]

Wrong. You are calculating the PV of a one-time payment of $130m in year 3, which is not the problem in the question!

The two formulas you provide are one and the same. The "cumulative formula" is generalized in order to account for different FVs at different dates t. Which is precisely the point I'm trying to get across to you, that you can't add the payments into a single value as you do. They yield different answers because they are calculations of different payment scenarios.


Brown_Pride, I'm sorry but that's bullshyt. There is one correct solution here, and I have provided ample explanations why this is the case.

Ahh...true Nas.

Wolf and Pride: Put simply -If you are solving this manually - You have to calculate each payment separately and then sum them at the end.

Year 1 + Year 2 + Year 3. In Year 3: You have to calculate the $10M and $100M lump sum payments.

The formula for the standard method assumes one payment of $130M in Year 3. Make sense?

If you are using Excel functions, use the formula I provided in my initial post.

We made a peace treaty though - so I am willing to let this issue rest.