060.00 63.60 $ 1,123.60 $ 1,123.60 67.42 $ 1,191.02 Time value of Money: 1. A single sum: Assume we will save $1,000 for three years and earn 6% interest compounded annually. On 1/1 in Year 1: $1,000 on Dec. 31 in Year3: $ 1,191.02 (a) Future value of a single sum = Present value * (1+ r) n Future value of $1000 after 3 years: 3 $1,000 × [1.06] = $1,191.02 (b) Present value of a single sum = Future value *( 1/ (1+ r) n ) Present value of $1,192.02: 3 $1,191.02 × (1/ [1.06] )= $1,000 Where
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included · Depreciation is a non cash expense. However, the tax effect of the same should be considered if tax rates are applicable · Second step is to discount the cash flows using an appropriate discounting rate considering the time value of money. · Finally, the best alternative is chosen after considering the following non-quantitative factors. Other outside factors: Other qualitative factors to be kept in mind by the manager are the following: Employee morale – in case
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College of Business and Finance The MBA Program Financial Management (FINC 501) 1st Semester (2012/2013) Final Exam Instructor: Dr. Wajeeh Elali Date: December 13, 2012 Time: 6:00pm -8:00pm |Student Name: | |Student ID: | ***Suggested Solutions*** INSTRUCTIONS: □ This is a CLOSED BOOK examination.
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investments undertaken by the firm. The role of cost of capital in capital budgeting: If IRR on New Investment > Cost of Capital ( Value of firm rises ( Stock Price rises If IRR on New Investment < Cost of Capital ( Value of firm falls ( Stock Price falls Why is the Cost of Capital equal to the return investors require? Because when the investors give the firm their money, they expect to earn a return commensurate with the risk of that project or firm. Therefore, at a minimum the firm must earn
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GSM 5110: Economics, Finance and Markets Homework 2: Time Value of Money (Multiple Cash Flows; Annuity; Loan Amortization; EAR vs. APR) Due 01/29/14 Please answer the following questions. There are three options regarding the format to complete this assignment. 1) Type everything including all math-related content; 2) Type the non-math-related content and leave enough space to handwrite math-related content such as equations and special symbols after you print it out; 3) Handwrite everything
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FI – 360 Chapter 3 P3-1) You have $1,500 to invest today at 7 percent interest compounded annually. A - How much will you have accumulated in the account at the end of the following number of years? 1). Three years PV x (1.07)^3 $1,500 x (1.07)(1.07)(1.07) $1,500 x 1.225043 = $1837.5645 = $1,837.56 2). Six years PV x (1.07)^6 $1,500 x (1.07)(1.07)(1.07)(1.07)(1.07)(1.07) $1,500 x 1.500730351849 = $2,251.0955 = $2,251.10 3). Nine years PV x (1.07)^9
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Determine the present value of regular payments of $250 to be made at the end of each of the next 50 years. The annual effective interest rate is 5%. A. 3598 B. 3975 C. 4136 D. 4564 E. 4973 2. Find the present value of 50 regular annual payments of $3000 at the beginning of each year, starting now. The annual effective interest rate is 6%. A. 50,000 B. 50,123 C. 50,234 D. 51,000 E. 51,234 3. Find the present value at time 0 of regular payments of $50 at times 25 years, 26 years, and
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be included as important resources of the organization. The project seeks to take the minimum time possible, and to utilize the resources to the least standards to minimize on costs, and maximize on the net present value. 1. Project Evaluation This project will be evaluated using the financial aspects of the net present value. Using a discount rate of 20%, we expect that the discounted future values will be able to meet the user requirements. This evaluation will be done based on the forecasted
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The Language of Real Estate Terms You Should Know * PV- Present Value The value of a single $ amount discounted back to the present * NPV- Net Present Value- Similar to PV only uses multiple values and discounts them back to the present * NOI- Net Operating Income * EBITDA - Earnings Before Interest Taxes Depreciation and Amortization * DCF - Discounted Cash Flow * Triple Net Lease – (aka NNN lease) a lease in which tenant pays a pro rata share of common area maintenance
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The short and long term investments of an organization affect the day to day decisions of management and it also affects the organization’s value. Because this affects the value of the organization it becomes extremely important to use appropriate and precise valuation methods in order to estimate business activities and or projects that can affect the value. Using valuation methods such as Internal Rate of Return or the Modified Internal Rate of Return can eliminate improper decisions and the organization
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