[재무구본일]Chapter 04-

[재무구본일]Chapter 04-

Info iconThis preview shows pages 1–14. Sign up to view the full content.

View Full Document Right Arrow Icon

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

View Full Document Right Arrow Icon

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

View Full Document Right Arrow Icon

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

View Full Document Right Arrow Icon

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

View Full Document Right Arrow Icon

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

View Full Document Right Arrow Icon

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

View Full Document Right Arrow Icon

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

View Full Document Right Arrow Icon
This is the end of the preview. Sign up to access the rest of the document.

Unformatted text preview: Finance 2007  2  Chapter 4,5 Discounted Cash Flow Valuation 4-2 Chapter Outline • Valuation: The One-Period Case • The Multiperiod Case • Compounding Periods • Simplifications (Annuities & Perpetuities) • What Is a Firm Worth? 4-3 Basic Definitions • Time Line • PV (Present Value, h&&& ): earlier money on a time line • FV (Future Value, h&&& ): later money on a time line • r (Interest rate, h& ): “exchange rate” between earlier money and later money Discount rate( h&& ), Cost of capital( h&&& ) Opportunity cost of capital, Required return( N G x ¡ ¢ ) 1 2 t PV FV … 4-4 Future Values 1 $1,000 FV=? r = 5% •Interest = 1000 x .05 = 50 •Value in one year = principal + interest = 1,000 + 50 = 1,050 •Future Value (FV) = 1,000 x (1 + .05) = 1,050 • Example: 1 year • Example: 2 year 2 $1,000 FV=? r = 5% 1 •FV = 1,000 x 1.05 x 1.05 = 1,102.50 4-5 Future Values: General Formula • FV = PV(1 + r) t FV = future value PV = present value r = period interest rate, expressed as a decimal t = number of periods • Future value interest factor = (1 + r) t 4-6 Effects of Compounding • Simple interest( h& ) FV with simple interest = 1000 + 50 + 50 = 1100 • Compound interest( h& ) FV with compound interest = 1000 + 50 + 52.50 = 1102.50 The extra 2.50 comes from the interest = .05 x 50 = 2.50 2 $1,000 FV=? r = 5% 1 4-7 Future Values • Example: 5 year •FV = 1,000 x (1.05) 5 = 1,276.28 • The effect of compounding is small for a small number of periods increases as the number of periods increases FV with simple interest = $1,250 1 2 5 $1,000 FV=? … r = 5% 4-8 Future Values: compound effect 4-9 Future Values • Example: 200 year •FV = 10 x (1.055) 200 = 447,189.84 1 2 200 $10 FV=? … r = 5.5% • The effect of compounding Simple interest = 10 + 200(10)(.055) = 120.00 Compounding added $447,069.84 to the value of the investment 4-10 Future Values 4-11 FV as a General Growth • Suppose your company expects to increase unit sales of widgets by 15% per year for the next 5 years. If you currently sell 3 million widgets in one year, how many widgets do you expect to sell in 5 years? •FV = 3,000,000(1.15) 5 = 6,034,072 1 2 5 3,000,000 FV=? … r = 15% 4-12 Present Values • How much do I have to invest today to have some amount in the future? FV = PV(1 + r) t PV = FV / (1 + r) t • Discounting mean finding the present value of some future amount. • Value the present value unless we specifically indicate that we want the future value. 4-13 Present Values • Example1: need $10,000 for a new car, 1 yr, 7% • Example2: prepare daughter’s college tuition $150,000 , 17 yr, 8% 1 PV=?...
View Full Document

{[ snackBarMessage ]}

Page1 / 50

[재무구본일]Chapter 04-

This preview shows document pages 1 - 14. Sign up to view the full document.

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