06model
10/6/2009 8:16
12/2/2002
Chapter 6. Model for Time Value of Money Analysis
This spreadsheet model uses Excel to do the calculations performed in Chapter 6.
We recommend that you use the model in
the following manner:
1.
First, recognize that you do not have to use this model at all to understand time value of money
concepts. However, if you do use the model and experiment with it, this will increase you
understanding of the concepts, and it will surely help you when you graduate and start working in the
real world.
2.
Assuming you decide to use the models, start by reading the chapter and working the examples as you
come to them with a calculator.
3.
We assume that you know the basics of Excel, but that you have not encountered some of its features
and that you may need a refresher on others.
So, we have built in explanations of how to do some of the
functions in the model.
As a result, you will learn more about Excel at the same time you learn about
the time value of money.
4.
Throughout this model, some data will appear in blue, which signifies that it is input data used in
formulas. You are encouraged to play with and change this input data to see the effect on the result.
All solutions generated by function wizards appear highlighted in peach.
FUTURE VALUE
In this section we show the model used to obtain the results presented in the text.
PROBLEM
Find the FV of $100 after five years at an interest rate of 5%.
Interest rate
5%
Cash flow
$100
Time period
0
1
2
3
4
5
FV at year end
$100.00
$105.00
$110.25
$115.76
$121.55
$127.63
have been solved.
One of the most valuable features in Excel is the "Function" Wizard.
Here is how to access and use the
"Function Wizard".
First, you must select the Function wizard icon found in the toolbar at the top of the screen, which looks like this
.
This
button allows you to enter the function wizard.
Upon clicking it, you should encounter a dialog box entitled, "Insert
Function".
At the top, you may search for recommendations on which function to use, or if you know the function you are
looking for you may find it by accessing the function categories.
Note:
This problem was solved using the formula, FV
n
= PV ( 1 + i )
n
.
However, there are a number of ways this problem could
A
B
C
D
E
F
G
H
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
29
30
31
32
33
34
35
36
37
38
39
40
41
42
43
44
45
46
47
48
This preview has intentionally blurred sections. Sign up to view the full version.
View Full Document
We will be selecting the "FV" function from the "Financial" category, and will be using the following dialog box to input data.
Notice that we entered a cell reference as the input for the problem instead of the actual value.
We do this so that our spreadsheet
can automatically reflect any changes to the input data.
This is one of the features that makes the spreadsheet such a valuable tool.
Using the function wizard will yield the following result:
FV
=
$127.63
=FV(B34,G37,,B35)
TABLE
Future Value Interest Factors
With a spreadsheet, calculating FVIF's is a simple operation, and we can use it to graph the relationship between future value,
growth, interest rates, and time.
A similar table can be found in the textbook.
This is the end of the preview.
Sign up
to
access the rest of the document.
 Spring '09
 EyupCetin
 Management, Time Value Of Money, Future Value, Net Present Value, Time Period, function wizard

Click to edit the document details