FINANCIAL MANAGEMENT- 12MBA25 FINANCIAL MANAGEMENT 12MBA25 VTU SECOND SEMESTER FINANCIAL MANAGEMENT- 12MBA25 MODULE -1 FINANCIAL MANAGEMENT Financial management is an academic discipline which is concerned with decision-making. This decision is concerned with the size and composition of assets and the level and structure of financing. In order to make right decision, it is necessary to have a clear understanding of the objectives. Such an objective provides a framework for right kind of
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we learned the 9 different formulas, for time value of money. 1. Future value of a single amount a. FV = PV X FVIF 2. Present value of a single amount b. PV = FV X PVIF c. This is to determine the present value of an amount to be received in the future. 3. Future value of an annuity d. FVA = A X FVIFA e. To determine the future value of a series of consecutive, equal payments (an annuity). 4. Present value of an annuity f. PVA= A X PVIFA
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of present value is so important for corporate finance and is often the very first topic taught in any finance class. Present Value is the process of determining what a cash flow to be received in the future is worth in today's dollars. Therefore, the Present Value of a future cash flow represents the amount of money today which, if invested at a particular interest rate, will grow to the amount of the future cash flow at that time in the future. The process of finding present values is called
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future values? How would you use present and future value techniques in preparing a financial retirement plan? How would various required rates of return affect the decisions? Explain you answer. Present value and future value measures the value at a specific period of time. Present value represents the value of an investment at the beginning of the investment period. For example, what the worth is currently would represent what the value would be today. Future value represents the value of an investment
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an investor lends you money and at the agreed date you must repay the money together with the fee charged for the use of the money, known as the interest * Interest is income from the money (capital) invested. * The capital originally invested is called the princible while the sum of the princible and the interest is called the future value. * Most interest transactions are described by the rate of interest, which is the ratio of the interest earned in one time unit to the principal
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Chapter 2 Time Value of Money MINI CASE Assume that you are nearing graduation and that you have applied for a job with a local bank. As part of the bank's evaluation process, you have been asked to take an examination which covers several financial analysis techniques. The first section of the test addresses discounted cash flow analysis. See how you would do by answering the following questions. a. Draw time lines for (a) a $100 lump sum cash flow at the end of year 2, (b) an ordinary
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Johnson Controls Inc. may have many investment opportunities in the emerging market but it must measures the potential of each opportunity preferably in isolation and make comparison of each in order to select the a few or just one that maximizes the value of the firm and reduce the potential risk. For example, Johnson Controls Inc. might be trying to determine if venturing into the emerging market will require buying new equipment or using the existing ones. The company might also be interested in determining
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1. What is the stock’s value? D = the most resent dividend which is = $2.00 per share. E (g) = the constant growth rate = 5% = 0.05 per year. R (Re) = Investors rate of return on the stock = 15% = 0.15 Formula used E (P) = D x (1 + E (g)) / (R (Re)-E (g)) E (P) = $2.00 x (1+ 0.05) / (0.15- 0.05) E (P) = $2.00 x (1.05) / (.1) E (P) = $2.10 / .1 E (P) = $ 21.00 The stock value is $21.00. 2. Suppose
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Chapter 4 Questions (4-2) What is an opportunity cost rate? How is this rate used in discounted cash flow analysis, and where is it shown on a time line? Is the opportunity rate a single number that is used to evaluate all potential investments? An opportunity cost rate is the rate of return you would earn on an alternative investment of similar risk if you don’t invest under consideration. (4-5) Would you rather have a savings account that pays 5% interest compounded semiannually or
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Finance The study of money and how it is used. Finance considers the relationship of money to time and risk. One of the main subsets of finance is the study of credit and banking, as this involves money, time, and risk all together. Finance may deal with personal or corporate issues, such as how will an individual or company acquires the money needed to perform a certain act. Debt. A debt is an obligation to repay an amount you owe. Debt securities, such as bonds or commercial paper, are forms of
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