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Present and Future Value Calculations

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When would we use present value calculations?
When would we use future value calculations?

Which is more likely to be used in accounting and why?

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Solution Summary

Almost 400 words on how to find present and future value and which is more commonly used in accounting.

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Present value is the future value being discounted by an appropriated capitalization rate. The value of sum of money received today is more than its value received after some time.

Present value
Present worth of rupee received after some time will be less than the rupee received today. This is because of time value of money. The investor has time preference of money because he has reinvestment opportunities for funds, which are received early.It is used to calculate the present value of amount or annuity.

The present value of a future cash flow is the nominal amount of money to change hands at some future ...

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