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Unformatted text preview: Chapter 5: The Time Value of Money Chapter 6: Discounted Cash Flows & Valuation Text: Parrino and Kidwell Chapter Commentary: Prof. C. Bathala Learning concepts and computations in time value of money (TVM) is somewhat challenging for some students. Often, mistakes are made in correctly identifying the nature of cash flows, the timing differences, use of appropriate interest (discount) rate, and getting confused between the present value (PV) and the future value (FV). Using time lines is very important, particularly during the learning phase, even if it takes a little more time to solve a problem. Working through word problems helps you grasp the underlying principles for computations than emphasizing only problems that straight away give the inputs and asks you to compute FV, PV, I, PMT, or N. I suggest first reading the chapter once (maybe twice). Next, solve the practice problems (on your own) taking guidance from the examples/discussion in the chapter. Note the answers to practice problems without looking over how the problems have been solved chapter....
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- Spring '09