There Are Three Factors That Affect the Present Value of an Annuity

question 55

Essay

There are three factors that affect the present value of an annuity. Explain what these three factors are and discuss how an increase in each will impact the present value of the annuity.

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Definitions:

Estimated Costs To Complete

Forecasted expenses still required to finish a project, often used in long-term project accounting.

Installment Method

An accounting technique for recognizing revenue and expenses from sales made on credit in proportion to the payments received, rather than at the time of sale.

Deferred Gross Profit

Profit from sales transactions not yet recognized in the income statement, typically because the revenue recognition criteria have not been fully met.

Installment Receivables

Money owed to a company from its customers who have purchased goods or services on a payment plan over a set period of time.