FINC 322 - TVM Formula Sheet

FINC 322 - TVM Formula Sheet - order to find the value of...

Info iconThis preview shows pages 1–2. Sign up to view the full content.

View Full Document Right Arrow Icon
FINC 322 Financial Management 1 Formulas for TVM, Bond and Stock Pricing, and Capital Budgeting (C. Lee) Chapter 5: Single CF TVM Unknown of Interest Discrete Compounding FV = amount PV = principal i = the rate over compounding period () r = nominal annual rate () m = number of compounding periods per year (# of compounding in a year) t = the number of years n = the number of conversion periods () EAR (Effective Annual Rate) Chapter 6: Multiple CFs TVM Uneven CFs ( h =0,1,2,3…, n ) Ordinary Annuity ( CF = periodic payment ) Unknown PV formula based FV formula based FV PV CF n i We do not have an equation such as “ i = “. The only possible setup is above, PV formula. We will leave i unknown. We do not have an equation such as “ i = “. The only possible setup is above, FV formula. We will leave i unknown. Annuity Due Perpetuity Growing Annuity Growing Perpetuity, Where g is the constant growth rate CF t=1 is CF at t =1 PV is the present value at t =0 “Riding the Timeline” Once you find the PV or FV of multiple CFs, you can move it along the timeline using a single CF formula in
Background image of page 1

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
Background image of page 2
This is the end of the preview. Sign up to access the rest of the document.

Unformatted text preview: order to find the value of those multiple CFs at any point in time. Value at time k would be: FINC 322 Financial Management 1 Formulas for TVM, Bond and Stock Pricing, and Capital Budgeting (C. Lee) Where FV is the future value at time n PV is the present value at time 0, 0 < k < n Chapters 7 and 8: Bond and Stock Pricing • Bond Pricing ( “ m =2” ) or; Where = price of bond = semiannual coupon = face value = annual yield to maturity (YTM= r ; YTM/2= i ) where ACR is an annual coupon rate • Stock Pricing Constant Dividend Model Dividend Growth Model where g =growth rate R =required return (equivalent to i ) P i =stock price at time i ; , 0< j < n Chapter 9: Capital Budgeting Net Present Value (NPV) Internal Rate of Return (IRR) When you have a single cash outflow at t =0: At IRR, PV(CF inflow )=PV(CF outflow ) When you have a single cash outflow at t =0:...
View Full Document

This note was uploaded on 12/13/2011 for the course FINC 322 taught by Professor Nazar during the Fall '11 term at Ferris State.

Page1 / 2

FINC 322 - TVM Formula Sheet - order to find the value of...

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