AGENDA: CAPITAL BUDGETING DECISIONS A. Present value concepts. 1. Interest calculations. 2. Present value tables. B. Net present value method. C. Internal rate of return method. D. Cost of capital as a screening tool. E. Further aspects of the net present value method. 1. Total-cost approach. 2. Incremental-cost approach. 3. Least-cost decisions. F. Uncertain future cash flows. G. Preference rankings. H. Payback period method. I. Simple
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Different countries have different currencies. Interest is the amount earned or paid on money which is lent. Compound interest is the ‘interest earned on interest’. Compound Interest (C.I)= [P*(1+r/100)^t – P] P=Principal amount r=Rate of interest t=Time period in years Interest may be compounded annually, semi-annually, quarterly, monthly or even daily. This is known as the compounding frequency. Greater the frequency of compounding, the greater the effective return or yield. Always adjust the ‘r’
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future growth rate of earnings, required rate of return and the company’s intrinsic value. Graphs and/or tables will be used to support the overall findings of the security. Introduction Robotics is on the rise, the concept of creating machines that can operate autonomously has been a goal set by man since the beginning of time. iRobot (irbt) has taken on this concept and has truly made it a reality in our time. Quite simply “iRobot designs and builds robots that make a difference” (iRobot, 2013)
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everything. There is a balance of work and life. He has chosen not to acquire any companies since it would take time away from his family. Many financial decisions must consider the time value of money The furniture store has to consider that a dollar today is worth more than a dollar tomorrow. The time value of money derives from the opportunity to earn interest on it. Simply stated, the time value of money is how much it costs to “rent” money. Emery Finnerty Stowe All Transactions have at least two
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GFS to survive (Guillermo Furniture Store Scenario, 2011). This paper will contain a discussion of the weighted average cost of capital (WACC), background on the use of multiple valuation techniques in reducing risks, a discussion on the net present value (NPV) of future cash flows for different alternative methods, and a sensitivity analysis. Guillermo Alternatives The financial downturn of Guillermo Furniture resulting from developments in the industry has caused a need for alternatives to be
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Time Value of Money Chad McDade FIN/200 November 11, 2011 Markques McKnight Time Value of Money The time value of money tells us that money available to us today is worth more than money available to us in the future; this is because of the earning potential of money. Money has an earning potential because of interest – money placed in an interest bearing account or investment earns money. If we place $1000 in a savings account that earns 5% interest at the end of a year we would have
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semi-annually. At the end of the distribution period the account balance will equal zero. Note that the first deposit will be made at the end of year 1 and the first distribution payment will be received at the end of year 21. Required: a) Draw a time line depicting all of the cash flows associated with Melanie Inc.’s view of the retirement annuity. [2 marks] b) How large a sum must Melanie Inc. accumulate by the end of year 21 to provide the 30-year, $60,000 annuity? [3 marks] c) How large
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Overview Compounding & Future Value Discounting & Present Value Multiple Cash Flows “Special” Streams of Cash Flows » Perpetuities » Annuities Interest Rates » APR versus EAR 3 Lottery Example You just won a lottery which gives you two options: (1) Receive $100 today (2) Receive $120 in one year $100 $120 0 Money Time 1 Which option should one take? 4 2 2 Lottery Example: Future Value If you take money now, you can put
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Lifetime Value Lifetime value (LTV) is calculated initially for groups (segments) of customers. Once determined, it can be attributed back to individual members of the group. To understand LTV, let’s look at a typical lifetime value table calculated for a group of 50,000 bank customers who have the same credit card performance as that shown by the previous example. Year 1 6.0% Year 2 8.0% 3,000 Year 3 10.0% 3,240 a Referral Rate b Referred Customers c Retention 75.0% 80.0% 85.0% Rate d Retained
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BUSINESS FINANCE FAO: DIRECTORS, NATURALLY FRESH PLC CONTENTS Page(s) 1. Introduction 3 2. Required Rate of Return on Equity 3 3. Beta 3 4. Capital Asset Pricing Model 4 5.1 Limitations of CAPM 4 5.2 The APT Model 4 5.3 The Three-Factor Model 4 5.4 Required Rate of Return using APT or Three-Factor 5 Model 5. Bonds 5 6.5 How bond prices are determined
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