# Preset Value Cash Flows.

This topic contains 15 replies, has 3 voices, and was last updated by  zeba93 1 year, 4 months ago. This post has been viewed 14 times

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• #53842

croki11
Participant

Hi,

An investment will generate cash flows of \$5,400 each year in years 3 to 10 (ie first amount to be received three years from now).The discount rate is 20% per annum.

What is the present value of the cash flows?

The answer is \$14,386 How to calculate this value? Can someone help!

#102079

zeba93
Participant

Hi croki,

In this question you need the annuity table because it is said that cash flow will be generated 5400 each year.

discounting rate is 20%
1-10years its 4.192
1-2years its 1.528 as we are told that first amount to be received is in 3year time so we should take the amount of the 2nd year
3-10years is 2.664 = (4.192-1.528)

5400×2.664 = \$14385.6

#102080

croki11
Participant

Hi Zeba,

Don’t have words to thank you for responding this question:-) Full of joy my face! Wow! Annuaty table to collect the values did not see this feature at all! but as you mentioned cash flow generated each Year! bingoxxx I can sleep now and keep practising. I’m presenting the exam this Wednesday 25th CBE let’s see how it goes.
Have you presented the exam already? If you did I’m sure you have passed 100 marks! So clever need your brain he,he,he,he!!!!!!
Thanks so much!!! Good night!!!
PS: Doing more exercises still

#102081

zeba93
Participant

Hi ismari,

By your questions i am also getting to learn. All the best for 25th. Me too haven’t done the exam yet, m doing CBE on Friday 27th. hehehe thanks will take that as a compliment

#102082

croki11
Participant

Hi Zeba:-)

Glad you also learning with my questions They are mainly from BPP Material Books Study.
My last day revising the topics! My strong subjects are Variance Analysis, Accounting for Overheads and Marginal & Absorption Costing. Not too clever with Cash Flows, discounting payback & Annuity calculations:-(
Could you be so kind and help me with this question:

An investment will generate a net cash inflaw of \$20,000 at the end of its first year. This will rise to \$25,000 at the end of the second year and remain at \$25,000 per annum in perpetuity. The relevant discount rate is expected to be 8% in the first year and 10% in second and subsequent years.
What is the present value of the cash inflaws?

Hammering my head at the moment!

#102083

zeba93
Participant

Hi ismari,

this question is spinning my head too!!

sorry don’t know either. but what is the answer?? may by that we can know what to do.

#102084

croki11
Participant

Hi Zeba,

This one is definitely a hard one the asnwers is : \$250,000 it has perpuity & annuity steps to do.
Maybe for the first year 20,000 x ?
2nd Year \$25,000 x (0.010)=250
Inconclusive?
I will let you know tomorrow if I pass, going to Liverpool St BPP Centre in the afternoon plus will let you know some of the questions as well
Keep practising

#102085

zeba93
Participant

Hi ismari,

Oww thanks
by the way how was you exam. m having mine tomorrow now i m nervous!!!
Hopping to here from you soon

#102086

croki11
Participant

Hi Zeba,

The college made a mistake with my exam venue listing me for Liverpool City instead of Liverpool Street here in London. Drama!!! I was fuming . So no exam they change the booking to the 1st of August instead. Another few extra days to keep practising.
Good luck!!! Zeba let me know!!!! Fingers cross for you I’m sure you pass very clever girl!!!
If you need working experience you can practice in the company I work for.xxxx
Good luck again!!!!!!xxxx Speak soon

#102087

ishika
Participant

@croki11 I am finding f2 very hard…which book are you following? Good luck for ur exam:)

#102088

croki11
Participant

Hi Ishika,

Thanks for your message. Yes agree F2 is quite hard topic. I’m following BPP Study Material books plus and i-pass CD that prepared you for CBE if you not seating paper exam.

Good luck to you too

#102089

zeba93
Participant

Hi ismari,

Finally i passed got 68% i am soooo very happy, now need to start preparing for the other papers.

majority i got theory questions. they were quite tough!!
hopping to hear from you soon. keep practicing. All the best

#102090

ishika
Participant

@croki11 me 2 following BPP..I am going for cbe end of aug..Thanku.

@Zeba Congrats well done to u.

#102091

zeba93
Participant

Hi Ishika

thanks alot

#102092

croki11
Participant

Zeba!!!! Congratulations!!!!! Well done I knew you’ll pass amazing feeling its passing any exams!!!! Yes

Wow!!! Tough theory question Gosh!!! They always play a bit part on these exams I think. Well let’s see how it goes for me happy with 52% will keep you posted

Ishika good luck to you too

#102093

zeba93
Participant

Yes ismari very happy feeling and also relief.

All the best to you. keep on practicing and do let me know how it goes

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