Chapter 5 - Chapter 5 Discounted Cash Flow Valuation FV of...

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05/13/09 Chapter 5: Discounted Cash Flow Valuation 1 Chapter 5 Discounted Cash Flow Valuation FV of annuities PV of annuities PV of unequal cash flows Finding the payment Finding the # of payments Finding the rate Perpetuities Effective interest Loan amortization
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05/13/09 Chapter 5: Discounted Cash Flow Valuation 2 FV of annuities If I invest $100 at the end of each year for 3 years at an interest rate of 10%, what will the value of my investment be at the end of 3 years? What if I invest the $100 at the beginning of each year for 3 years? (annuity due)
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05/13/09 Chapter 5: Discounted Cash Flow Valuation 3 PV of annuities I win a $10,000 “mini-lottery”! But I get $1,000 per year starting now for 10 payments. The appropriate interest rate for this cash flow is 6%. What is the present value of the lottery proceeds?
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05/13/09 Chapter 5: Discounted Cash Flow Valuation 4 PV of unequal cash flows A real estate investment will generate the following cash flows (end of year): Year 1: -$500
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