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A fixed royalty of 10000 per year is granted to author by the publisher of a book.the receiving royalty is sold 12 years elapsed.find to the nearest rupee the price which is at sold assuming worth 12% compounded annually time value of money?
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A fixed royalty of 10000 per year is granted to author by the publishe...
Calculation of Present Value
To calculate the present value of the fixed royalty of 10000 per year, we need to use the formula for present value of an annuity:
PV = A x [1 - (1 + r)^-n] / r
Where PV is the present value, A is the annuity payment, r is the interest rate per period, and n is the number of periods.
In this case, A = 10000, r = 0.12 (12% per year), and n = 12 (12 years). Plugging in these values, we get:
PV = 10000 x [1 - (1 + 0.12)^-12] / 0.12
PV = 78250.55
Therefore, the present value of the fixed royalty is Rs. 78250.55.
Explanation
The fixed royalty of 10000 per year is a series of cash flows that the author will receive for 12 years. However, the author may want to know the present value of these cash flows, which represents the value of the cash flows in today's money.
To calculate the present value, we need to use the concept of time value of money, which states that money today is worth more than the same amount of money in the future. This is because money today can be invested and earn interest, while money in the future cannot.
In this case, we assume an interest rate of 12% per year, which represents the opportunity cost of investing the money elsewhere. Using this interest rate, we can discount the future cash flows to their present value.
The formula for present value of an annuity calculates the present value of a series of equal cash flows. In this case, the annuity payment is 10000 per year for 12 years. By plugging in the values of A, r, and n into the formula, we get the present value of the annuity, which represents the present value of the fixed royalty.
Conclusion
The present value of the fixed royalty of 10000 per year for 12 years, assuming an interest rate of 12% per year, is Rs. 78250.55. This means that if the author wants to sell the fixed royalty, the present value of the cash flows is the amount that the author should expect to receive.
To calculate the present value of the fixed royalty of 10000 per year, we need to use the formula for present value of an annuity:
PV = A x [1 - (1 + r)^-n] / r
Where PV is the present value, A is the annuity payment, r is the interest rate per period, and n is the number of periods.
In this case, A = 10000, r = 0.12 (12% per year), and n = 12 (12 years). Plugging in these values, we get:
PV = 10000 x [1 - (1 + 0.12)^-12] / 0.12
PV = 78250.55
Therefore, the present value of the fixed royalty is Rs. 78250.55.
Explanation
The fixed royalty of 10000 per year is a series of cash flows that the author will receive for 12 years. However, the author may want to know the present value of these cash flows, which represents the value of the cash flows in today's money.
To calculate the present value, we need to use the concept of time value of money, which states that money today is worth more than the same amount of money in the future. This is because money today can be invested and earn interest, while money in the future cannot.
In this case, we assume an interest rate of 12% per year, which represents the opportunity cost of investing the money elsewhere. Using this interest rate, we can discount the future cash flows to their present value.
The formula for present value of an annuity calculates the present value of a series of equal cash flows. In this case, the annuity payment is 10000 per year for 12 years. By plugging in the values of A, r, and n into the formula, we get the present value of the annuity, which represents the present value of the fixed royalty.
Conclusion
The present value of the fixed royalty of 10000 per year for 12 years, assuming an interest rate of 12% per year, is Rs. 78250.55. This means that if the author wants to sell the fixed royalty, the present value of the cash flows is the amount that the author should expect to receive.
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A fixed royalty of 10000 per year is granted to author by the publisher of a book.the receiving royalty is sold 12 years elapsed.find to the nearest rupee the price which is at sold assuming worth 12% compounded annually time value of money?
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A fixed royalty of 10000 per year is granted to author by the publisher of a book.the receiving royalty is sold 12 years elapsed.find to the nearest rupee the price which is at sold assuming worth 12% compounded annually time value of money? for CA Foundation 2025 is part of CA Foundation preparation. The Question and answers have been prepared according to the CA Foundation exam syllabus. Information about A fixed royalty of 10000 per year is granted to author by the publisher of a book.the receiving royalty is sold 12 years elapsed.find to the nearest rupee the price which is at sold assuming worth 12% compounded annually time value of money? covers all topics & solutions for CA Foundation 2025 Exam. Find important definitions, questions, meanings, examples, exercises and tests below for A fixed royalty of 10000 per year is granted to author by the publisher of a book.the receiving royalty is sold 12 years elapsed.find to the nearest rupee the price which is at sold assuming worth 12% compounded annually time value of money?.
A fixed royalty of 10000 per year is granted to author by the publisher of a book.the receiving royalty is sold 12 years elapsed.find to the nearest rupee the price which is at sold assuming worth 12% compounded annually time value of money? for CA Foundation 2025 is part of CA Foundation preparation. The Question and answers have been prepared according to the CA Foundation exam syllabus. Information about A fixed royalty of 10000 per year is granted to author by the publisher of a book.the receiving royalty is sold 12 years elapsed.find to the nearest rupee the price which is at sold assuming worth 12% compounded annually time value of money? covers all topics & solutions for CA Foundation 2025 Exam. Find important definitions, questions, meanings, examples, exercises and tests below for A fixed royalty of 10000 per year is granted to author by the publisher of a book.the receiving royalty is sold 12 years elapsed.find to the nearest rupee the price which is at sold assuming worth 12% compounded annually time value of money?.
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