chap004 - Chapter 4 DISCOUNTED CASH FLOW VALUATION SLIDES...

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Chapter 4 DISCOUNTED CASH FLOW VALUATION SLIDES 4.1 Key Concepts and Skills 4.2 Chapter Outline 4.3 The One-Period Case 4.4 Future Value 4.5 Present Value 4.6 Present Value 4.7 Net Present Value 4.8 Net Present Value 4.9 Net Present Value 4.10 The Multiperiod Case 4.11 Future Value 4.12 Future Value and Compounding 4.13 Future Value and Compounding 4.14 Present Value and Discounting 4.15 How Long is the Wait? 4.16 What Rate is Enough? 4.17 Calculator Keys 4.18 Multiple Cash Flows 4.19 Multiple Cash Flows 4.20 Valuing “Lumpy” Cash Flows 4.21 Compounding Periods 4.22 Compounding Periods 4.23 Effective Annual Rates of Interest 4.24 Effective Annual Rates of Interest 4.25 Effective Annual Rates of Interest 4.26 EAR on a Financial Calculator 4.27 Continuous Compounding 4.28 Simplifications 4.29 Perpetuity 4.30 Perpetuity: Example 4.31 Growing Perpetuity 4.32 Growing Perpetuity: Example 4.33 Annuity 4.34 Annuity: Example 4.35 Continued 4.36 Growing Annuity 4.37 Growing Annuity: Example 4.38 Growing Annuity: Example 4.39 What Is a Firm Worth? 4.40 Quick Quiz
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A-51 CHAPTER 4 CHAPTER WEB SITES Section Web Address End-of-chapter material www.mhhe.com/edumarketinsight CHAPTER ORGANIZATION 4.1 Valuation: The One-Period Case 4.2 The Multiperiod Case Future Value and Compounding The Power of Compounding: A Digression Present Value and Discounting The Algebraic Formula 4.3 Compounding Periods Distinction between Stated Annual Interest Rate and Effective Annual Rate Compounding over Many Years Continuous Compounding 4.4 Simplifications Perpetuity Growing Perpetuity Annuity Growing Annuity 4.5 What is a Firm Worth? ANNOTATED CHAPTER OUTLINE Slide 4.0 Chapter 4 Title Slide Slide 4.1 Key Concepts and Skills Slide 4.2 Chapter Outline This chapter explains the algebra of the time value of money and net present value. NPV depends upon the size, timing, and riskiness of expected cash flows, which is consistent with the maximization of shareholder wealth discussed in Chapter 1. There are three ways to compute time-value-of-money problems: with a financial calculator (or spreadsheet), with formulas, and with time value factor tables. A good understanding of the formulas is necessary to value more complex cash flow streams in later chapters; however, the
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CHAPTER 4 A-52 understanding of financial calculators and spreadsheets is just as important. Lecture Tip: Many students find the phrases “time value of money” and “a dollar today is worth more than a dollar later” a bit confusing. In some ways it might be better to say the “money value of time.” Indeed, much of the terminology surrounding exchanges of money now for money later is confusing to students. For example, present value as the name for money paid or received earlier in time and future value as the name for money paid or received later in time are a constant source of confusion. How, students ask, can money to be paid next year be a “present” value; how can money received today be a “future” value? They must be made aware that we mean earlier money and later money.
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This note was uploaded on 12/21/2011 for the course NIKA 101 taught by Professor Temur during the Spring '11 term at Acton School of Business.

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chap004 - Chapter 4 DISCOUNTED CASH FLOW VALUATION SLIDES...

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