Quiz 1 - Sheet

Quiz 1 - Sheet - • Net working capital-Current Assets...

Info iconThis preview shows pages 1–2. 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 DocumentRight Arrow Icon
This is the end of the preview. Sign up to access the rest of the document.

Unformatted text preview: • Net working capital-Current Assets minus Current Liabilities • The Net Present Value ( NPV ) of an investment is the present value of the expected cash flows, less the cost of the investment. o NPV better than IRR o IRR pick one project, mutually exclusive, multiple IRRs needed, scale problems o Payback doesn’t consider discounting, time value of money, risk, etc. • FV = C ×(1 + r ) T • Where C is cash flow at date 0, r is the appropriate interest rate, and T is the number of periods over which the cash is invested. • Compounding interest: T m m r C FV × + × = 1 (m is times compounded annual) • EAR= m n m r × + 1 • the annual rate that would give us the same end-of-investment wealth • FV = C × e rT • Perpetuity- A constant stream of cash flows that lasts forever • r C PV = • Growing perpetuity- A stream of cash flows that grows at a constant rate forever • g r C PV- = • Annuity- A stream of constant cash flows that lasts for a fixed number of periods • +- = T r r C PV ) 1 ( 1 1 • Growing annuity- A stream of cash flows that grows at a constant rate for a fixed number of periods • + +-- = T r g g r C PV ) 1 ( 1 1 • CH. 5 BondsCH....
View Full Document

This note was uploaded on 10/20/2010 for the course FINA 127 taught by Professor Arthurj.wilson during the Spring '10 term at GWU.

Page1 / 3

Quiz 1 - Sheet - • Net working capital-Current Assets...

This preview shows document pages 1 - 2. Sign up to view the full document.

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