century 21 accounting © 2009 south-western, cengage learning lesson 16-1 business decisions using...
TRANSCRIPT
CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning
LESSON 16-1LESSON 16-1
Business Decisions UsingPresent Values
CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning
2
LESSON 16-1
$1,000
$1,600
$1,400
$1,200
$800
Future Value of $1,000 at 10% Interest
$1,000.00
$1,000.00
1/1/X1
FUTURE VALUE OF MONEYFUTURE VALUE OF MONEY
$133.10
$1,000.00
$100.00
$121.00
$110.00
$1,464.10
12/31/X4
$121.00
$1,000.00
$110.00
$100.00
$1,331.00
12/31/X3
$110.00
$1,000.00
$100.00
$1,210.00
12/31/X2
$100.00
$1,000.00
$1,100.00
12/31/X1
$1,000.00 × 10%
$ 100.00
$1,100.00 × 10%
$ 110.00
$1,210.00 × 10%
$ 121.00
$1,331.00 × 10%
$ 133.10
page 474
CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning
3
LESSON 16-1
Interest RateCurrent Investment Value on 12/31/X2
Interest Earnedin 20X3
× =
FUTURE VALUE OF MONEYFUTURE VALUE OF MONEY
$1,210.00 × = $121.0010%
Interest Earned in 20X3
Current Investment Value on 12/31/X2
Balance on12/31/X3
+ =
$1,210.00 + = $1,331.00$121.00
page 475
CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning
4
LESSON 16-1
PRESENT VALUE OF MONEYPRESENT VALUE OF MONEY page 476
Projected Net Cash Flows $ 1,464.10
times Present Value Factor × 0.683
Present Value $ 999.98
CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning
5
LESSON 16-1
BUSINESS DECISIONS USING BUSINESS DECISIONS USING PRESENT VALUESPRESENT VALUES page 477
CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning
6
LESSON 16-1
TERMS REVIEWTERMS REVIEW
time value of money future value compounding present value rate of return cash flows net cash flow net present value
page 478