Chapter_14_Capital_Budgeting

Chapter_14_Capital_Budgeting - Chapter 14 Capital Budgeting...

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Chapter 14 Capital Budgeting Decisions
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Agenda Course Evaluations Appendix A-Interest Concepts Net Present Value Basics and Problems
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Appendix A-Intro Concepts Premise- Dollar today is worth more than a dollar in the future because you could put today’s dollar in the bank and get interest. Basic Interest Formula- F1=P(1+r) F1= balance at end of one period P=Amount invested now r= the rate of interest per period $100 invested today will be worth $105 in a year
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Appendix A-Intro Concepts Compound Interest- Calculating future value n periods in the future Fn=P(1+r)^N $100 invested at 5% annually after two years is equal to 110.25
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Appendix A-Intro Concepts Present Values= Present Value of a future cash flow called discounting. The rate is called the discount rate.
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Appendix A-Intro Concepts A series of Identical future cash flows is called an annuity. EXAMPLE: Lacey Company has purchased a tract of land on which a $1,000 payment will be due each  year for the next five years. What is the present value of this stream of cash payments when the  discount rate is 12%?      Cash  12% Factor 
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Chapter_14_Capital_Budgeting - Chapter 14 Capital Budgeting...

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