Fair Market Value

GENRAL MATHEMATICS

JOJO G. BALANSAG
 OBJECTIVES: After going through this module, you
are expected to:

 1. calculate the fair market value of a cash flow stream

that includes an annuity;
 2. compare the fair market value of cash flow; and
 3. make a decision based on the market value of cash
flow.
Recap: Simple Annuity
Fix value:
 FAIR MARKET VALUE
Fair Market Value of a Cash Flow
Cash flow is a term that refers to payments received (cash inflows) or
payments or deposits made (cash outflows). Cash inflows can be
represented by positive numbers and cash outflows can be represented
by negative numbers. It is also the amount of cash and cash-
equivalents being transferred into and out of the business.
The fair market value or economic value of cash flow (payment
stream) on a particular date refers to a single amount that is
equivalent to the value of the payments stream at that date. This
particular date is called the focal date. In its simplest sense, fair
market value (FMV) is the price that an asset would sell for on the
open market.
FUTURE VALUE
SOLUTION:
PRESENT VALUE
SOLUTION:
FAIR MARKET VALUE:
SOLUTION:
MR. OCAMPO’S OFFER:
MR. OCAMPO’S OFFER:
MR. CRUZ’S OFFER:
MR. CRUZ’S OFFER:
MR. CRUZ’S OFFER:
DIY (Do it Your Self)