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
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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
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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.
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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
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Discounted Cash Flow (DCF) Dollar Return
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Ch.9_Time Value of Money2_Inst - CHAPTER 9 Time Value...

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