Time Value of Money Compounding – The process of determining the value of a cash flow or series of cash flows at some point in the future when compound interest is applied. Discounting – The process of finding the present value of a cash flow or series of cash flows; the reverse of compounding. Time Line – A graphical representation used to show the timing of cash flows. If not otherwise stated, assume that the cash flow(s) occur at the end of the period indicated. Terminology
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keystrokes before you begin work on statistical or TVM functions. Please note that your calculator’s sign convention requires that one of the TVM inputs ([PV], [FV], or [PMT]) be a negative number. Intuitively, this negative value represents the cash outflow that will occur in a TVM problem. 1. To set the number of decimal places that show on your calculator: [2nd]→[FORMAT]→{Desired # of decimal places}→[ENTER]→[CE/C] For the exam, I would make sure that the number of decimal places is set to 5. 2. To set
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Chapter 11 Efficient Capital Markets: Evidence 1. Roll’s critique (1977) is based on the assumption that capital markets are in equilibrium. What happens when the market is not in equilibrium? Suppose new information is revealed such that the market must adjust toward a new equilibrium which incorporates the news. Or suppose that a new security is introduced into the marketplace, as was the case of new issues studied in the Ibbotson (1975) paper. Given such a situation, the abnormal performance
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1.0 Introduction 1.1 Company Profile Company Name : Northern Health Clinic (NHC) Owners : Dr. EdryYussof and Dr. Wilson Chen City : Jitra, Kedah, Malaysia Postal Code : 06010 Phone Number : (+604)2028606 Year Established : 5 years ago Business Activities : provide traditional medical care and preventive medicine Objective : to ensure that patients are in healthy and fit condition Employee : 17 Patient base : 3500
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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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SCHAUM’S OUTLINE OF THEORY AND PROBLEMS OF INTERMEDIATE ACCOUNTING II Second Edition BARUCH ENGLARD, M.S., M.B.A., CPA Associate Professor of Accounting The College of Staten Island The City University of New York SCHAUM’S OUTLINE SERIES New York Chicago San Francisco Lisbon London Madrid Mexico City Milan New Delhi San Juan Seoul Singapore Sydney Toronto Copyright © 2007, 1992 by The McGraw-Hill Companies, Inc. All rights reserved. Manufactured in the United States of America
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KEATMX01_p001-008.qxd 11/2/12 2:22 PM Page 1 Calculations for Time Value of Money TVM In this appendix, a brief explanation of the computation of the time value of money is given for readers not familiar with this subject. Modern technology has made these calculations very easy. Many computer programs have built-in time-value functions, and a large assortment of handheld calculators will solve these problems using special keys. However, some people who use these methods do not understand
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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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SOLVING TIME VALUE OF MONEY PROBLEMS I. Single (Annual) Compounding Period Examples A. Future Value (FV) of a Single Current Lump Sum Received One Period Hence FV = PV(1+i) | PV: current (or present) value | | i: a given interest rate (or rate of return) | (If the tables are used, this is the related formula: FV = PV * FVIF Equation 2 in the Week 1 Lecture) Example: You place $100 today in a bank deposit account that pays 10% annual interest. In other words, interest on your $100
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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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