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Cash inflow for 3 years, interest rate-6%
2004- 5000
2005-6000
2007-8000Present vable-
5%-0.95
6%-0.94
7%-0.93What value should be included in the year end 2005?
Answers- In some questions, they take the value for the CY like 2005 and then multiply with 6%. In some questions the add the full cash inflow and then multiply woth present value.
I don’t understand, why is that.
Thanks
Hi,
The value in use is the present value of the future cash flow. To get the present value we multiply the cash flow by the discount factor, which here would be using the one at 6%. To answer the question fully then I’d need to see more of it as I don’t know what date we are calculating the value in use at.
Thanks,
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