Ch.9_Time Value of Money2_Inst

# Ch.9_Time Value of Money2_Inst - CHAPTER 9 Time Value...

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1 Future and present values Uneven cash flow streams Investment returns Intra-period compounding Amortization CHAPTER 9 Time Value Analysis

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2 Learning Objectives Calculate the present & future value of an uneven cash flow stream Calculate internal rate of return Create an amortization table Describe and apply stated, periodic, and effective annual interest rates
3 Uneven Cash Flow Streams 0 \$100 1 \$300 2 \$300 3 10% -\$50 4 \$ 90.91 247.93 225.39 -34.15 \$530.08 = PV

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4 Dollars MUST be valued at the same point in time before you can add them up! Rule t = 30 t = 0
5 Investment Returns Financial performance of an investment measured by its return Measured either in dollar terms or as a rate of return (percentage terms)

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6 Investment Returns - Example Assume that a hospital is evaluating a new MRI. The project’s expected cash flows are given on the next slide.
7 MRI Investment Expected Cash Flows (in thousands of dollars) 0 \$310 1 \$400 2 \$500 3 \$750 4 -\$1,500

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8 Simple Dollar Return– WRONG WAY 0 \$310 1 \$400 2 \$500 3 \$750 4 310 400 500 750 \$ 460 = Simple dollar return -\$1,500
Discounted Cash Flow (DCF) Dollar Return

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## This note was uploaded on 02/24/2010 for the course HPM 340 taught by Professor Reiter during the Spring '10 term at UNC.

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Ch.9_Time Value of Money2_Inst - CHAPTER 9 Time Value...

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