[Discussion] - 3

# [Discussion] - 3 - one , 2 million at year two , and -3...

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External Financing Needed t t Internal Growth Rate stainable Growth Rate ) 1 ( Sales) Projected ( Δ Sales Sales Liab Spon Sales Sales Assets d PM - × × - × - Δ × b ROA - 1 b ROA × × OE t Sustainable Growth Rate t Make sure you broadly understand WHY these formulas are the way they are. See the simulation file on courseweb. b ROE - 1 b ROE × ×

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Future Value ) 1 ( r NPV + = T 1 FV 1
Shortcuts Annuity + - = N r r C ) 1 ( 1 1 1 Perpetuity r C 1 =

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Present Value Annuity Future Value 4 3 2 1 ) 1 ( ) 1 ( ) 1 ( ) 1 ( r r r r NPV + + + + + + + = C 1 C 1 C 1 C 1 N C PV 1 C 1 1 = + = t t R NPV 1 ) 1 ( + - = N r r ) 1 ( 1
Growing Cases Future Value + + - - = T r g g r C PV ) 1 ( 1 1

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Perpetuity Future Value + + + + + + = ) 1 ( ... ) 1 ( ) 1 ( 2 1 r r r NPV C 1 C 1 C 1 1 C PV C 1 = + = 1 ) 1 ( t t R NPV r =
Growing Cases Future Value g r C PV - =

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Sample Problem 1 Orange Computers is attempting to value their tablet computer product, the EyePad. Interest is 5% The project is estimated to make 5 million at year

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Unformatted text preview: one , 2 million at year two , and -3 million in year ree s it worth it? three . Is it worth it? NPV NPV = + 5/(1+0.05)^1 + 2/(1.05)^2-3/(1+0.05)^3 Sample Problem 2 Lets say I want to retire a millionaire at the age of 60. Suppose Im 23 right now. How much do I need to place in a ROTH IRA every ar in order to retire, at 21.84%? year in order to retire, at 21.84%? Payback Period Payback Period Payments over time T. R = interest rate Payback Period Payback Payments over time T. R = interest rate Discounted Payback Period Discounted Payback Payments over time T. R = interest rate IRR Internal Rate of Return Payments over time T. R = interest rate...
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## [Discussion] - 3 - one , 2 million at year two , and -3...

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