(bonds) * Equity: represents ongoing ownership in a business or property (common stocks) * Derivative Securities: neither debt nor equity; derive value from an underlying asset (futures, options, swaps, indices) Risks * Low Risk or High Risk * Risk: chance that actual investment returns will differ from those expected Time * Short-Term or Long-Term * Short-Term: mature within one year * Long-Term: maturities of longer than a year * Domestic or Foreign
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patent, by selling it to a third party for a one-time licensing fee. Regards S G Shrinivas EXECUTIVE SUMMARY Dr. Ramkumar wants to apply for a patent for his research on a cost-effective Siddha product for coronary atherosclerosis. A decision, whether to go ahead with the request, will have to be made, as this could have long standing implications for both Siddha and the institute. Among the options available for patenting the product - One-time licensing fee or leaving the manufacturing to
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Additional funds needed AMT Alternative minimum tax APR b Annual percentage rate Beta coefficient, a measure of an asset’s riskiness bL Levered beta bU Unlevered beta BEP BVPS CAPEX CAPM CCC Basic earning power Book value per share Capital expenditures Capital Asset Pricing Model Cash conversion cycle CF Cash flow; CFt is the cash flow in Period t CR Conversion ratio CV Coefficient of variation Dp Dividend of preferred stock Dt Dividend
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Compound growth rates are exponential over time. Explain. Growth rates, as well as interest rates, are not linear, but rather exponential over time. In other words, the growth rate of the invested funds is accelerated by the compounding of interest. Over time, the principal amount you receive interest on will get larger with compounding, thus generating higher interest payments 5.9 What is the Rule of 72? This is a rule of thumb to determine how fast an investment can double. It is a rule
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of Benefits: Wealth maximization approach considers both the quality and quantity of benefits. It also incorporates the time value of money as we can see that the value of esteem of cash flows is calculated by discounting its element back to the present at a capitalization that reflects both time and risk. A large capitalization rate is the result of higher risk and longer time period. Thus an esteem of cash flows that is quite certain might be
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goal? A. 15.07% B. 15.13% C. 15.17% D. 15.20% E. 15.24% 2. Marko, Inc. is considering the purchase of ABC Co. Marko believes that ABC Co. can generate cash flows of $5,000, $9,000, and $15,000 over the next three years, respectively. After that time, Marko feels ABC will be worthless. Marko has determined that a 14% rate of return is applicable to this potential purchase. What is Marko willing to pay today to buy ABC Co.? A. $19,201.76 B. $21,435.74 C. $23,457.96 D. $27,808.17 E. $29,808
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each period. Compound interest calculates the future value of money in which interest is calculated on the cumulative principal and interest earned up to that point. 2. What is the future value of $10,000 for an interest rate of 16% and 1 annual period of compounding? for an annual interest rate of 16% and 2 semiannual periods of compounding? for an annual interest rate of 16% and 4 quarterly periods of compounding? The future value of $10,000 with an interest rate of 16% and 1 annual
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Chapter 4—Present Value MULTIPLE CHOICE 1. Which of the following would you rather have if your rate of discount is 20 percent? a. $300 in one year b. $350 in two years c. $420 in three years d. $1500 in ten years 2. Suppose the rate of discount is 5 percent, 6 percent, 7 percent, or 8 percent. Suppose that you would rather have $425 in one year instead of $400 today. Also, you would rather have $400 today instead of $445 in two years. What is the rate of discount? a. 5 percent b. 6 percent c. 7
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organizations due to ensure they have a good amount of working capital is ensuring they are paid on time (accounts receivable). In addition, it is also important they are paying their creditors on time. Last, it is important to invest any excess cash to maximize profitability. * What is capital planning? Why is the internal rate of return important to an organization? Why is net present value important to a project? How do you select from multiple projects presented to your organization?
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N, i%, PV, PMT, FV, CHS (-ve), g=BEG, g=END, CL Ch 3&4- Time Value of Money 1. –Future Value:Amount into which an investment 2. will grow after earning interest for a given period 3. of time. 4. 1. Single Cashflow: * - Compounding to FV = PV(1 + i%)n * - Discounting to PV = FV (1 + i%)- n * 2. Annuities:Series of EQUAL CFs at regular * periods/Intervals. * -Special case: Bonds/Loans(personal, business, * mortgages)/ Life insurance
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