fm3_chapter01 - A 1 2 3 4 Discount rate Year 1 2 3 4 5 B...

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COMPUTING THE PRESENT VALUE Discount rate 10% Year Cash flow 1 100 90.9091 #MACRO? 2 100 82.6446 #MACRO? 3 100 75.1315 #MACRO? 4 100 68.3013 #MACRO? 5 100 62.0921 #MACRO? Net present value Summing cells C5:C9 379.08 #MACRO? Using Excel's NPV function 379.08 #MACRO? Using Excel's PV function 379.08 #MACRO? Present value A B C D 1 2 3 4 5 6 7 8 9 10 11 12 13 14
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Discount rate 10% Year 1 100 90.9091 #MACRO? 2 200 165.2893 #MACRO? 3 300 225.3944 #MACRO? 4 400 273.2054 #MACRO? 5 500 310.4607 #MACRO? Net present value Summing cells C5:C9 1065.26 #MACRO? Using Excel's NPV function 1065.26 #MACRO? COMPUTING THE PRESENT VALUE In this example the cash flows are not equal Either discount each cash flow separately or use Excel's NPV function Excel's PV doesn't work for this case Cash flow Present value Present value of each cash flow A B C D 1 2 3 4 5 6 7 8 9 10 11 12 13
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COMPUTING THE NET PRESENT VALUE Discount rate 10% Year Cash flow 0 -250 -250.00 #MACRO? 1 100 90.91 #MACRO? 2 100 82.64 #MACRO? 3 100 75.13 #MACRO? 4 100 68.30 #MACRO? 5 100 62.09 #MACRO? Net present value Summing cells C5:C10 129.08 #MACRO? Using Excel's NPV function 129.08 #MACRO? Present value A B C D 1 2 3 4 5 6 7 8 9 10 11 12 13 14
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COMPUTING THE VALUE OF A FINITE ANNUITY Periodic payment, C 1,000 Number of future periods paid, n 5 Discount rate, r 12% Present value of annuity Using formula 3,604.78 #MACRO? 3,604.78 #MACRO? Period 1 1,000.00 #MACRO? 2 1,000.00 3 1,000.00 4 1,000.00 5 1,000.00 3,604.78 #MACRO? Using Excel's PV function Annuity payment Present value using Excel's NPV function A B C 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16
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COMPUTING THE VALUE OF AN INFINITE ANNUITY Periodic payment, C 1,000 Discount rate, r 12% Present value of annuity 8,333.33 #MACRO? A B C 1 2 3 4
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COMPUTING THE VALUE OF A GROWING FINITE ANNUITY First payment, C 1,000 Growth rate of payments, g 6% Number of future periods paid, n 5 Discount rate, r 12% Present value of annuity Using formula 4,010.91 #MACRO? Period 1 1,000.00 #MACRO? 2 1,060.00 #MACRO? 3 1,123.60 #MACRO? 4 1,191.02 #MACRO? 5 1,262.48 #MACRO? 4,010.91 #MACRO? Annuity payment Present value using Excel's NPV function A B C 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16
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COMPUTING THE VALUE OF A GROWING INFINITE ANNUITY Periodic payment, C 1,000 <-- Starting at date 1 Growth rate of payments, g 6% Discount rate, r 12% Present value of annuity 16,666.67 #MACRO? A B C 1 2 3 4 5
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INTERNAL RATE OF RETURN Year Cash flow 0 -800 1 200 2 250 3 300 4 350 5 400 Internal rate of return 22.16% #MACRO? A B C 1 2 3 4 5 6 7 8 9 10
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INTERNAL RATE OF RETURN Discount rate 12% Year Cash flow 0 -800 1 200 2 250 3 300 4 350 5 400 Net present value (NPV) 240.81 #MACRO?
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This note was uploaded on 01/23/2011 for the course FGB 780 taught by Professor Edwardchang during the Spring '09 term at Missouri State University-Springfield.

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fm3_chapter01 - A 1 2 3 4 Discount rate Year 1 2 3 4 5 B...

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