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View Full Version : What the heck is Steeneck doing?

10-18-2005, 03:29 PM
Ok, I'm totally baffled on the calculations concerning the unwinding of the discount by years in the US method for calculating the ambivalence point.

Let's assume for a minute that his 1999, 2000, and 2001 breakdown of 131,271, 86,837, and 51,897 is correct. The total of these 3 terms, 270,005 is discounted by taking the PV of the string of payments:

131,271*(1.05)^-.5 + 86,937*(1.05)^-1.5 + 51,896*(1.05)^-2.5 = 254,754. So far so good.

But now let's look at the acutal breakdowns of 1999-2001.

Supposedly you allocate the discount by:

Paid + (Change in reserves)*IRS tax factor

So let's try 1999:
500,000 + (500,000-1,000,000)*..................

I just realized what was going on. The sadist changed the IRS factor in 12/99. .722532 and .729995 look awfully similar when they're crammed into that footnote. What a terrible presenation. I hope we get a simplified version of this on the exam.

10-18-2005, 04:52 PM
I don't know what the 12/00 or 12/01 factors are either. And I'm not putting in any more effort to figure this out.

Examinator
10-19-2005, 05:08 PM
I think you'll be ok. They've only asked a question where you've had to calulate the PV(unwind) once, in its first year on the syllabus. Since then they've given you that quantity outright, and even then they haven't asked a question like this recently. Too time consuming, they must think.

kleinehase
10-20-2005, 10:40 AM
Are we responsible for the Canadian purpose calculation of the ambivalence point?

BassFreq
10-20-2005, 10:48 AM
Theoretically, yes. Its on the paper, so its testable.

In reality, I would think that they would avoid testing that (put it on the Canadian part 7), but you never know. They have asked questions in the past based on the US tax method.

Mel-o-rama
10-20-2005, 05:18 PM
I personally like his presentation on the very last page. "Look at this y'all. Everything for Clear is the same thing as Dark. How about that?" I'm glad he clarified!

Mel-o-rama
10-20-2005, 05:19 PM
Are we responsible for the Canadian purpose calculation of the ambivalence point?
Only if you're planning on taking the Canadian version of 7 (hee hee). Okay, I'll stop joking now. I'm just freaking out a little.