Section3

Section3 - Discounted Cash Flow Valuation Discussion...

Info iconThis preview shows pages 1–7. Sign up to view the full content.

View Full Document Right Arrow Icon
Discounted Cash Flow Valuation Discussion Section 3 (01-29-2010)
Background image of page 1

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
Outline Time value of money Present/Future values Perpetuity/ Growing Perpetuity Annuity/ Growing Annuity
Background image of page 2
Time value of money (1) Why would a firm be willing to borrow an amount of money (say $500) in exchange for a promise to repay 20 times that amount ($10,000) in the future (say in 30 years)?
Background image of page 3

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
Time value of money (2) Would you be willing to pay $500 to the firm, in exchange of $10,000 in 30 years? What would be the key considerations o answer yes or no? Would your answer depend on who is making the promise to repay?
Background image of page 4
Present/Future Values As you increase the time, what happens to future and present values? PV=FV/(1+r) t
Background image of page 5

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
Interamerican Inc. has an unfunded pension liability of $800 million that must be paid in 20 years. To assess the value of the firm’s stock, analysts want to discount this liability back to the present. If the relevant discount is 9.5% what is the present value of this liability? PV=FV/(1+r)
Background image of page 6
Image of page 7
This is the end of the preview. Sign up to access the rest of the document.

This note was uploaded on 02/08/2010 for the course ENGR 111 taught by Professor King during the Fall '09 term at UCLA.

Page1 / 12

Section3 - Discounted Cash Flow Valuation Discussion...

This preview shows document pages 1 - 7. Sign up to view the full document.

View Full Document Right Arrow Icon
Ask a homework question - tutors are online