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PV Function

The PV function calculates the present value factor that can be used to multiply by the expected cash flow to determine the present value.

PV(number of periods, discount rate) * value

Where the discount rate is expressed as a percentage.

  • PV(5,8)

    Returns the present value of $1 to be received five years from now at the discount rate of 8%.

  • A client did not record a likely asset retirement obligation of $500,000 where the useful life of the asset is 5 years and the credit-adjusted risk-free rate is 5%.The initial cost will be recognized as:

    Long-Lived Asset (Asset Retirement Cost) $500,000

    ARO Liability $500,000


    The use of the PV function can be applied to calculate the related accretion expense and ARO liability that should be recorded at year end:

    PV(5,5) * 500,000 = $108, 237


    Accretion Expense $108,237

    ARO Liability $108,237

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