Corporate Finance
40 Corporate Finance Claessens, Constantijn A, Simeon Djankov, and Larry H P Lang (1999). ‘Who Controls East Asian Corporation ...
Chapter 2 Time Value of Money OBJECTIVES Calculate the future value of a single cash flow at a given interest rate. Calculat ...
42 Corporate Finance BASIS FOR TIME VALUE OF MONEY A cash flow available in the future is worth less than a similar cash flow ...
Time Value of Money 43 Exhibit 2.1a Future value interest factor An Illustration Suppose you open a bank account with Rs 5,000 ...
44 Corporate Finance Exhibit 2.1b Future value interest factor Interest rate r (percent) Year (n)8 9 10 11 12 1 1.080 1.090 1. ...
Time Value of Money 45 An Illustration Suppose you are pursuing an MBA program: the second year fee is Rs 45,000, and is not e ...
46 Corporate Finance Cash flow Time 0 1 2 500 1000 1500 What would happen to the future value if the cash flow was to occur at ...
Time Value of Money 47 PV = 2 (1.08) 1500 .1 08 1000 500 ++ Notice that Rs 500 is in current rupees. So we are not finding its ...
48 Corporate Finance The term within brackets, r rn−+ 1)1( is called the Future Value Interest Factor of an Annuity or FVIFA. ...
Time Value of Money 49 An Illustration On December 31, you buy a car for Rs 200,000—paying 20 percent upfront and agreeing to ...
50 Corporate Finance Loan outstanding for 1st year = Rs 1000000 Loan outstanding for 2nd year = Rs (1000000 – Loan repaid) = 1 ...
Time Value of Money 51 In general, Effective rate = [1 + (r/m)]m – 1 (5) where r = nominal annual rate and m= number of times ...
52 Corporate Finance IN CONCLUSION Money has time value. It is to be explicitly recognized in financial analysis. A rupee ava ...
Time Value of Money 53 Future Value, FVAn= A(1 + r)n–1 + A(1 + r)n–2 + ··· + A (2A) Multiply both sides of the equation by (1 ...
54 Corporate Finance Derivation of Future Value of an Annuity (Cash flows occur at the beginning of the period): FVAn = A(1 + ...
Time Value of Money 55 CONCEPT TEST State whether the following statements are true or false: A series of periodic cash flows ...
56 Corporate Finance QUESTIONS The current Earnings per Share (EPS) of the Hindustan Engineering Company is Rs 3.80. Analysts ...
Time Value of Money 57 (d) From the bank balance calculated above, how much cash can you withdraw for 10 years? (e) If current ...
58 Corporate Finance Chapter 3 Risk and Return OBJECTIVES How to measure security return for single and multiple periods. ...
Risk and Return 59 shared by its unit holders in proportion to the number of units owned by them. Thus a mutual fund is the mo ...
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