AFM102March232011

AFM102March232011 - Introduction to Management Accounting...

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Click to edit Master subtitle style 5/11/11 Introduction to Management Accounting March 23, 2011 Time Value of Money 11
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5/11/11 Key Concepts in Today’s Class Time value of money Present value of single payments Future value of single payments Nominal versus effective rate of interest 22
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5/11/11 Time Value of Money Because money can earn a return its value depends on when it is received In making investment decisions the problem is that investment cash is paid out now, but the cash return is received in the future
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5/11/11 Time Value of Money Because money has a time-dated value, the critical idea in financial analysis is: Amounts of money spent or received at different periods of time must be converted into their value on a common date in order to be compared
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l 2003 Prentice Hall Business Publishing, PowerPoint Some Standard Notation Abbr. Meaning n FV PV a r Number of periods considered in the investment analysis; common period lengths are a month, a quarter, or a year Future value, or ending value, of the investment n periods from now Present value, or the value at the current moment in time, of an amount to be received n periods from now Annuity, or equal amount, received or paid at the end of each period for n periods Rate of return required, or expected, from an investment opportunity; the rate of interest earned on an investment
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This note was uploaded on 05/11/2011 for the course AFM 102 taught by Professor R.ducharme during the Spring '09 term at Waterloo.

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AFM102March232011 - Introduction to Management Accounting...

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