Our Explanation of Future Value of a Single Amount will show you the power of compounded interest on a single deposit. You will see how the future value tables can be useful as well as the rule of 72.
Our Explanation of Future Value of a Single Amount will show you the power of compounded interest on a single deposit. You will see how the future value tables can be useful as well as the rule of 72.
A term often used in present value calculations to distinguish a one-time cash amount from an annuity (or series of equal payments).
The amount that a recurring equal amount deposited at the end of each period will grow to under compounded interest. An ordinary annuity is also known as an annuity in arrears.
A series of equal amounts at equal time intervals. Also see annuity due, annuity in advance, annuity in arrears, and ordinary annuity.
Our Explanation of Future Value of a Single Amount will show you the power of compounded interest on a single deposit. You will see how the future value tables can be useful as well as the rule of 72.
payments are a constant amount, the market interest rate for the bond is likely to be continually changing. A change in the market interest rate will cause the present value of the interest payments (and the present...
The discounted value of a single future amount. To learn more, see our Present Value of a Single Amount Outline.
What is net present value? Definition of Net Present Value Net present value is the combination of 1) the present value of cash inflows, and 2) the present value of the cash outflows. To arrive at these present value...
What is the meaning of arrears? In accounting we use the word arrears in at least two ways. One use involves the omitted dividends on cumulative preferred stock. For example, if a corporation has cumulative preferred...
and the investment earns a consistent 10% per year compounded annually. The following table illustrates how the single deposit of $100,000 will grow as a result of the compounding at 10% per year. (The amounts are...
interest expense than the cash amount of interest paid. DISCOUNT ONUDSICT Unscramble DISCOUNT DOSUTNIC Unscramble 17. __________ on Bonds Payable will cause the carrying value of the bonds to be greater than the face...
Our Explanation of Future Value of a Single Amount will show you the power of compounded interest on a single deposit. You will see how the future value tables can be useful as well as the rule of 72.
A series of equal amounts occurring at the beginning of each equal time interval. Also known as an annuity due. An example would be the monthly rent on an apartment.
to maturity) is the interest rate that will discount the interest stream (an ordinary annuity) and the maturity amount (a lump sum) to $287,832. This can be done with software, a financial calculator, or via trial and...
Our Explanation of Present Value of a Single Amount discusses the time value of money and the need to discount future amounts to the time of an investment or other transaction. The present value of 1 table is used to...
, and the number of periods that the interest is compounded, you will be able to calculate the __________ present value by using a future value of 1 table. 6. Assume that you are calculating the future value of a single...
The book value of an asset is the asset’s cost minus the accumulated depreciation since the asset was acquired. This net amount is not an indication of the asset’s fair market value. The book value of an...
is 0.68 ($68,000 divided by $100,000). The factor of 0.68 at the end of five years appears in the column headed 8%. (See the present value of 1 table at the beginning of this quiz.) 10% Wrong. See the calculation for...
Our Explanation of Present Value of a Single Amount discusses the time value of money and the need to discount future amounts to the time of an investment or other transaction. The present value of 1 table is used to...
What is the difference between Present Value (PV) and Net Present Value (NPV)? Definition of Present Value (PV) Present value or PV is the result of discounting one or more future amounts to the present. The greater the...
statements that it has dividends in arrears. Dividends in arrears (and their current dividend) must be paid to the preferred stockholders before the common stockholders can be paid a dividend. When an annuity consists...
intervals. A bond’s semiannual interest payments can be described as one of these. ordinary annuity This is a series of equal amounts occurring at the end of equal time intervals. A bond’s semiannual interest...
Our Explanation of Future Value of a Single Amount will show you the power of compounded interest on a single deposit. You will see how the future value tables can be useful as well as the rule of 72.
What is NPV? Definition of NPV NPV is the acronym for net present value, which can be calculated as follows: The present value of the future cash inflows Minus the cash investment Example of NPV Assume that a company...
How do I calculate IRR and NPV? Definition of IRR The internal rate of return (IRR) method or model determines the interest rate that discounts all cash inflows and cash outflows to a net present value of $0. In other...
The recognition that a dollar in the present is more valuable than a dollar in the future. Present-value calculators and present-value tables assist in converting future dollars to the present value in order to make a...
Why does the internal rate of return equate to a net present value of zero? Internal rate of return and net present value are discounted cash flow techniques. To discount means to remove the interest contained within the...
of a bond is the rate that will discount both the bond’s future interest payments and the bond’s maturity value to a present value that is equal to the bond’s current market value. If the market interest rate...
How do you compute the selling price of a bond? Definition of Selling Price of Bond The selling price (or the market value) of a bond is the present value of the future contractual cash amounts that are going to be...
outflows for each option. Since these cash flows will occur at different times, you must “discount” the future cash flows to a present value. (This is necessary in order to recognize the time value of money.) The...
as a separate cost. Examples of Implicit Costs and Explicit Costs Let’s assume that a company gives a promissory note for $10,000 to a seller of a unique used machine for which the fair value is unknown. The...
is the cash amount plus the note’s present value at time that the asset is purchased. To illustrate this, let’s assume that equipment is purchased by giving $50,000 of cash plus a promissory note of $100,000. If...
, the expected net receipts will be $1,000. Often we need to know the present value of amounts expected in the future. We calculate the present value by discounting the future amounts. In this situation discounting means...
What is DCF? In accounting, DCF refers to discounted cash flows or to the discounted cash flow techniques such as net present value or internal rate of return. DCF is a preferred method for evaluating capital...
Our Explanation of Bonds Payable covers the recording of bonds, the accrual of interest expense, and the amortization of the discount and premium on bonds payable. You gain an understanding on why the market value of...
A process which discounts future cash flows to the present in order to reflect the time value of money. Examples of the discounted cash flow model are net present value and internal rate of return.
The present fair market value.
Our Explanation of Future Value of a Single Amount will show you the power of compounded interest on a single deposit. You will see how the future value tables can be useful as well as the rule of 72.
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