HANH DANG ID 1236466 ASSIGNMENT 1 CHAPTER 4 4-8 Present Value (PV) = $20,000 Time : 5 years = 60 months Interest Rate : 12% = 1% per month The monthly loan payment is FV = PV (1+I)^N = $-20000 (1+ 0.01) ^60 = $444.89 EFF% = (1+I/M)^M – 1 = (1 + 0.12/12)^12 – 1 = 1.1268 – 1 = 0.1268 The loan’s EFF % = 12.68% 4-10 a. FV = PV (1 + I)^N = $500 (1+ 0.06) ^ 10 = $895.42 b. FV = $500 (1+0.12)^10 = $1552.92 c. PV = $500 / (1+0.06)^10 = $279.20 d. PV = $500 / (1+ 0.12)^ 10 =
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Review of time value of money Simple interest Example: A firm borrows $1,000 for a year at 10% simple interest per year. How much must the firm repay after one year? FV = future value = 1,000(1+r) = 1,000 (1.1) =1,100 What if the loan is for 3 years, at compound interest of 10% per year? If compounding is annual: FV = 1,000 (1+r)3 = 1,000 (1.1)3 = 1,331 3 Review of time value of money In general, FV = PV (1+r)t = PV * FVIF (r, t) FVIF = future value interest factor
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Jersey 07458 To Kathryn, you’re the inspiration, and to Diana and Jimmy, with joy and pride. Craig CONTENTS Preface PART 1 TIME VALUE OF MONEY Chapter 1 Single Cash Flow 1.1 Present Value 1.2 Future Value Problems Chapter 2 Annuity 2.1 Present Value 2.2 Future Value 2.3 System of Four Annuity Variables Problems Chapter 3 Net Present Value 3.1 Constant Discount Rate 3.2 General Discount Rate Problems Chapter 4 Real and Inflation 4.1 Constant Discount Rate 4.2 General
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Breakeven is given by: [pic] 7.23 Given: [pic] Breakeven is given by: (a) [pic] (b) [pic] 7.24 Option A: Stay as is Option B: Add new equipment [pic] Therefore, the company should stay with the present equipment. 7.25 Option A: Stay as is Option B: Add new equipment, raise selling price [pic]
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calculate present value. A. Suppose your bank account will be worth $15,000.00 in one year. The interest rate (discount rate) that the bank pays is 7%. What is the present value of your bank account today? What would the present value of the account be if the discount rate is only 4%? The present value for a bank account that is worth $15, 000 in one year at an interest rate of 7% will be $14019.00. Using the Present Value Factors Table for a period of one year at a 7% rate value factor is
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Tutorial: Present Values and Debt Pricing This material involves a review of topics covered during your FIN 214 course. You may also find more information on it in Chapter 6 of the AC 305/306 textbook (the first half of the book may be accessed through the “Read, Study, & Practice” module of WileyPlus). When you are considering any type of long-term investment – whether you are making the investment in a project, or making an investment in a long-term asset, or attempting to get long-term
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16. FORMULAS AND TABLES Assets equal liabilities plus equity V = B + S (1.1) Quadratic equation ax2 + bx + c = 0 (1.2) Roots of a quadratic equation x = \r(b2 − 4ac),2a) (1.3) Geometric series, S = a + ax + ax2 + ax3 + ... + axn−1 (1.4) Sum of geometric
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additional steel rings. Management has initially indicated that it does not want to scrap this material for a total loss. Also, another sales organization within PWI manufactures and sells the machines that use these retainer rings. Using Net Present Value analysis, we indicate that the manufacturing of plastic rings, verses steel rings, is more cost effective from year two and beyond, even accounting for the total loss of the steel wire already purchased and in stock. This analysis took into account
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Finance, Seventh Edition I. Value 3. How to Calculate Present Values © The McGraw−Hill Companies, 2003 CHAPTER THREE H O W T O C A L C U L A T E PRESENT VALUES 32 Brealey−Meyers: Principles of Corporate Finance, Seventh Edition I. Value 3. How to Calculate Present Values © The McGraw−Hill Companies, 2003 IN CHAPTER 2 we learned how to work out the value of an asset that produces cash exactly one year from now. But we did not explain how to value assets that produce cash
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CHAPTER 4 Discounted Cash Flow Valuation What do baseball players Jason Varitek, Mark Teixeira, and C. C. Sabathia have in common? All three athletes signed big contracts in late 2008 or early 2009. The contract values were reported as $10 million, $180 million, and $161.5 million, respectively. But reported figures like these are often misleading. For example, in February 2009, Jason Varitek signed with the Boston Red Sox. His contract called for salaries of $5 million, and a club option of
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