ADMS 3530 Review Session - Notes and Examples Ch.4: TVM PV & FV: SINGLE CASH FLOWS Future Value: FV = PV × (1 + r)n Present Value: PV = Future Value (1 + r)n PV & FV: MULTIPLE CASH FLOWS Example 1: Multiple Cash Flows In two years from today, the following cash flows will have a future value of $3032.32: $200 today, $Y at the end of one year, and $2,400 at the end of two years. The annual interest rate is 4%. What is Y? A) $330.00 B) $400.00 C) $416.00 D) $432.64 E) $167.55 PERPETUITIES & ANNUITIES
Words: 3875 - Pages: 16
* Credit or Default Risk - Credit risk is the risk that a company or individual will be unable to pay the contractual interest or principal on its debt obligations. This type of risk is of particular concern to investors who hold bonds in their portfolios. Government bonds, especially those issued by the federal government, have the least amount of default risk and the lowest returns, while corporate bonds tend to have the highest amount of default risk but also higher interest rates. Bonds with
Words: 1501 - Pages: 7
for the company I as a financial manager, I had to consider some factor before taking part of investing in this company. I considered many factors that included its financial statements, records of performance over the past few years, and even the returns on investments. The revenues of Toyota Motor Corporation had an increase of 17.8% and totalled up to 19.12 trillion Yen, proving to be enticing to an investor who is interested in investing in the company’s stock. Toyota Motor Corporation had an operating
Words: 3050 - Pages: 13
Suggested Solutions for the Numerical Questions in Exam I 6. (10) | Mr. Dell has $100 income this year and zero income next year. The market interest rate is 10% per year. Mr. Dell also has an investment opportunity—having the same risk as the market in which he can invest $50 this year and receive $80 next year. Suppose Mr. Dell consumes $50 this year and invests in the project. What is the NPV of the investment opportunity? NPV = (80/1.1) - 50 = + 22.73. | 7. (11) | Ms. Anderson has $60,000
Words: 1364 - Pages: 6
market, enterprise demands funds to move beyond the startup phase • For collaborative activities benefits cannot be completely captured by social enterprise • Funding agencies may not take risk to support new projects in lieu of existing programs • Time horizon may not be aligned with that of potential funders • Return expectations may be misaligned with the income generation ability of social enterprise • Hybrid structures can raise issues among the public and private sector players • Social entrepreneurs
Words: 883 - Pages: 4
sdf Calculating Returns: CAPM vs. DCF Kalen Hickey American Military University The Capital Asset Pricing Model (CAPM) and Discounted Cash Flows Method are different techniques for determining returns on an investment. These concepts deal with the time value of money and the other investment factors. “If decisions are made that ignore the interaction of scale and risk, then cash flows are misvalued and suboptimal operations decisions are made” (Lederer & Mehta). Companies use CAPM
Words: 654 - Pages: 3
Product Description BA 350 Week 7 Assignment, 6-2 Required Rate of Return Assume that the risk-free rate is 6% and that the expected return on the market is13%. What is the required rate of return on a stock that has a beta of 0.7? ri = rRF + (Rm – rRF)bi Where: Bi = Beta rRF = risk-free rate rM = market risk premium ri = required rate of return ri = 6% + (13%-6%)0.7 ri = 6% + 4.9% ri = 10.9% 6-6 Required Rate of Return Suppose rRF = 5%, rM = 10%, and rA = 12%. a. Calculate Stock A’s
Words: 280 - Pages: 2
500 Trust |California R.E.I.T. |Brown Group | |Standard Deviation |4.61% |9.23% |8.17% | |Expected Return |1.10% |-2.27% |-0.67% | | |Vanguard & California R.E.I.T. |Vanguard & Brown
Words: 1440 - Pages: 6
Budgeting A. Suppose the company is considering a potential investment project to add to its portfolio. Calculate the following items: Before Home Depot calculates the net present value (NPV), internal rate of return (IRR), terminal value (TV), and modified internal rate of return (MIRR), the company must calculate its FCFs. The calculation begins by subtracting the operating costs and the 20% depreciation expenses from the cash flows derived from sales revenues. Next, the income tax (35%) is
Words: 1787 - Pages: 8
1. For each company A. Deterring the mean and standard deviation of the returns. B. Calculate the coefficient of variation. C. Determine which company appears to be more volatile with respect to its risk. D. Identify the company with which you would choose to invest. Part a: Year | Company A Return | Company B Return | Average Market Return | Company A Deviation | Company A Deviation Squared | Company B Deviation | Company B Deviation Squared | 1985 | 5.0% | 4.0% | 2.0% |
Words: 605 - Pages: 3
