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+--- Thread: How do I do this Finance Problem??? (/Thread-How-do-I-do-this-Finance-Problem)
How do I do this Finance Problem??? - bmills072200 - 04-22-2008
If it is currently the year 1990, with a discount rate of 8%, what is the present value of the cash flow shown below?
Year Cash Flow
1990 8000
1991 4000
1992 (22000)
1993 9000
I have the BAII Plus Calculator and I have figured out how to do all of the calculations in the IC section for Finance except for these questions on present value of cash flow...I just can't figure out how to enter the information correctly and come up with the solution. It's probably a long shot, but can anyone help?
How do I do this Finance Problem??? - Older student - 04-23-2008
Calculator:
If you enter your cash flows, with 8% interest, my calculator shows PV = -$13.
Manually using Present Value Table:
CF0 = 8000 * 1 = 8000PV
CF1 = 4000 * .9259 = 3703.60PV
CF2 = -22000 * .8573 = -18860.60
CF3 = 9000 * .7938 = 7144.20
Sum of PVs = -$13
Since the first payment of $8000 was received initially, the PV would be itself (not discounted). All other cash flows would use the factor for 8% starting from year 1 to year 3, from the Present Value table that DSST will give you if you request it. For the DSST Princ of Finance exam, you are not allowed to use a financial calculator. The proctor is suppose to give you a standard no feature calculator. This is clearly stated in the DSST documentation (DSST Candidate Bulletin 2007) for this exam (unless they changed it). Your proctor should also give you the DSST supplied, four financial tables if you request it in advance. I'm assuming you are taking the CBT version of the exam. Take a look at the Principle of Finance DSST topic in the Specific Exam Feedback section for details on this exam. This exam has been somewhat controversial as to (1) can I use a financial calculator, (2) should I memorize formulas and (3) or will the tables be there for me to use. There are links to the DSST material and others in that topic. With this in hand, call dsst customer support, confirm the facts, then discuss the exam with your proctor to make sure you will be provided with the proper "auxiliary testing materials" you are allowed to have. Good luck.
How do I do this Finance Problem??? - bmills072200 - 04-23-2008
Thanks for the help - I figured out how to do this on my calculator...
I am aware about the calculator restrictions...however, my proctor has allowed me to use this calculator for Stats and Accounting, so I am hoping to get away with it. On a personal note: I think it is absolutely ridiculous to not allow these calculators for this exam. I work for Wachovia and I know several financial analysts and I do not know one that uses tables or memorized equations to compute basic financial functions like future value and cash flow. I will throw a hissy fit if I don't get away with it...(Actually I will probably just stew about it and go home and learn the formulas and then come back the next day....)