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Ask the NINJAs: Present Value Calculations for FAR


Dear NINJAs,

Do you now if time value of money is on the FAR exam?

If so, do they ask the very complex questions that I see in my review course? – Terri

 

 

Dear Terri,

Your CPA Review course may be over-doing it.

For the most part, the TVM calculations for FAR aren't as in-depth as they are for BEC, where topics like Capital Budgeting are tested.

For FAR, you will need to know the difference between two different cash flows using a table and pick the correct number.

An example from NINJA MCQ would be:

MCQ2

Make sure you know the difference between an Annuity Due and an Ordinary Annuity.

For example – with Lease Payments (from the NINJA Notes):

Annuity Due
o Payments begin at the start of the lease
o Think: Rent is Due at the first of the month

Ordinary Annuity
o Payments begin after the end of the first year
o Think: An annuity that pays you at end of year

 

 

-The NINJAs

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