Introduction to Corporate Finance
3: The Time Value of Money example FIGURE 3.10 PRESENT VALUE OF A FIVE-YEAR MIXED STREAM DISCOUNTED AT 9% The present value of t ...
PART 1: INTRODUCTION As you no doubt suspect, there is a general formula for computing the present value of a stream of future c ...
3: The Time Value of Money 3-6b FINDING THE PRESENT VALUE OF AN ORDINARY ANNUITY The present value of an ordinary annuity is fou ...
PART 1: INTRODUCTION As was the case with the future value of an annuity, a shortcut formula is available to simplify the presen ...
3: The Time Value of Money 3-6c FINDING THE PRESENT VALUE OF AN ANNUITY DUE We can find the present value of an annuity due in m ...
PART 1: INTRODUCTION 3-6d FINDING THE PRESENT VALUE OF A PERPETUITY A perpetuity is an annuity with an infinite life; it promise ...
3: The Time Value of Money preferred dividends, it usually must make up lost dividends before it can pay dividends on ordinary s ...
PART 1: INTRODUCTION 3-6e FINDING THE PRESENT VALUE OF A GROWING PERPETUITY By definition, perpetuities pay a constant periodic ...
3: The Time Value of Money 3-7 ADVANCED APPLICATIONS OF TIME VALUE The techniques we have studied thus far have many different a ...
PART 1: INTRODUCTION Semiannual Compounding The semiannual compounding of interest involves two compounding periods within the y ...
3: The Time Value of Money As you should expect by now, the more frequently that interest compounds, the greater the amount of m ...
PART 1: INTRODUCTION 3 -7b STATED VERSUS EFFECTIVE ANNUAL INTEREST RATES Both consumers and businesses need to make objective co ...
3: The Time Value of Money Not surprisingly, the maximum effective annual rate for a given stated annual rate occurs when intere ...
PART 1: INTRODUCTION As usual, Excel provides a shortcut for this calculation in the form of the payment PMT (payment) function. ...
3: The Time Value of Money For example, suppose that you borrow $25,000 at 8% annual interest for five years to purchase a new c ...
PART 1: INTRODUCTION To find the annual payment required on the five- year, $25,000 loan with an 8% annual interest rate, we sub ...
3: The Time Value of Money payments (rather than annual) on consumer loans, we now demonstrate amortisation calculations using m ...
PART 1: INTRODUCTION SUMMARY ■ Financial managers can use future-value and present-value techniques to equate cash flows occurri ...
3: The Time Value of Money 3.3a =×∑ + − = FV CFt (1 r)nt t n 1 3.4 FV PMT r r [(1)n 1] =× +− 3.5 =× +− F ...
PART 1: INTRODUCTION Investment A: Invest a lump sum of $2,750 today in an account that pays 6% annual interest and leave the fu ...
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