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# Chapter+5+Spreadsheet+Model - 05 Chapt er model Chapter 5...

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1 05 Chapter model 12-10-08 Chapter 5. The Time Value of Money Then, when you hit the enter key, you get the answer, 115.76. Table 5-1. Summary of Future Value Calculations -\$100.00 5.00% 3 Periods: 0 1 2 3 | | | | Cash Flow Time Line: -\$100 FV = ? Step-by-Step Approach: \$100 \$105.00 \$110.25 \$115.76 = \$115.76 3 5 -\$100.00 \$0 Calculator Approach: N I/YR PV PMT FV \$115.76 Excel Approach: Fixed inputs: \$115.76 Cell references: \$115.76 The Compounding Process: A Graphic View You can work this problem in the same ways that we discussed above. Table 5-2. Summary of Present Value Calculations \$115.76 Interest rate = I = 5.00% No. of periods = N = 3 Periods: 0 1 2 3 | | | | Cash Flow Time Line: PV = ? \$115.76 Step-by-Step Approach: \$100.00 \$105.00 \$110.25 \$115.76 = \$100.00 3 5 \$0 \$115.76 Calculator Approach: N I/YR PV PMT FV -\$100.00 Excel Approach: PV Function: Fixed inputs: -\$100.00 Cell references: -\$100.00 In the Excel formula, 0 indicates that there are no intermediate cash flows. The Discounting Process: A Graphic View Present value (PV) -\$100.00 Future value (FV) \$150.00 No. of years (N) 10 Interest rate function = RATE(N,0,PV,FV) Interest rate (I) 4 .14 % =RATE(C111,0,C109,C110) Present value (PV) -\$500,000 Future value (FV) \$1,000,000 Interest rate (I) 4 .50% No. of years (N) =NPER(I,0,PV,FV) No. of years (N) 15.74 73 =NPER(C122,0,C120,C121) Table 5-3. Summary: Future Value of an Ordinary Annuity Payment amount = PMT = \$100.00 Interest rate = I = 5.00% 3 Periods: 0 1 2 3 | | | | Cash Flow Time Line: -\$100 -\$100 -\$100 -\$100.00 Multiply each payment by -\$105.00 -\$110.25 -\$315.25 Formula Approach: = \$315.25 3 5 \$0 -\$100.00 Calculator Approach: N I/YR PV PMT FV \$315.25 Excel Function Approach: FV Function: Fixed inputs: \$315.25 Cell references: \$315.25 Summary: Future Value of an Annuity Due (Diagram Not in Text) Payment amount = PMT = \$100.00 Interest rate = I = 5.00% Number of periods = N = 3 Periods: 0 1 2 3 | | | | Cash Flow Time Line: -\$100 -\$100 -\$100 -\$105.00 Multiply each payment by -\$110.25 -\$115.76 -\$331.01 Formula Approach: = \$331.01 BEG MODE 3 5 0 -100 Calculator Approach: N I PV PMT FV 331.01 Excel Function Approach: FV Function: Fixed inputs: 331.01 Cell references: 331.01 Excel entries correspond with these calculator keys: FV Summary: Present Value of an Ordinary Annuity Payment amount = PMT = \$100.00 Interest rate = I = 5.00% Number of periods = N = 3 Periods: 0 1 2 3 | | | | Cash Flow Time Line: -\$100 -\$100 -\$100 \$95.24 Divide each payment by \$90.70 \$86.38 \$272.32 Formula Approach: = \$272.32 3 5 -100 0 Calculator Approach: N I PV PMT FV 272.32 Excel Function Approach: PV Function: Fixed inputs: 272.32 Cell references: 272.32 Excel entries correspond with these calculator keys: PV Summary: Present Value of an Annuity Due (Not in text; this is a "bonus") Payment amount = PMT = \$100.00 Interest rate = I = 5.00% Number of periods = N = 3 Periods: 0 1 2 3 | | | | Cash Flow Time Line: -\$100 -\$100 -\$100 -\$100.00 Divide each payment by -\$95.24 -\$90.70 -\$285.94 Formula Approach: = \$285.94 BEG MODE 3 5 -100 0 Calculator Approach: N I PV PMT FV 285.94 Excel Function Approach: PV Function: Fixed inputs: 285.94 Cell references: 285.94 Excel entries correspond with these calculator keys: PV FINDING PMT No. of years (N) 5 Interest rate (I) 6% Present value (PV) \$0 Future value (FV) \$10,000 END MODE =PMT(I,N,PV,FV) BEGIN MODE =PMT(I,N,PV,FV,Type=1) Payment (PMT ) -\$1,773.96 =PMT(C262,C261,C263,C264 ) Payment (PMT ) -\$1,673.55 FINDING N Interest rate (I) 6% Present value (PV) \$0 Payment (PMT) -\$1,200 Future value (FV) \$10,000 =NPER(I,PMT,PV,FV) No. of years (N) 6.96 =NPER(C274 ,C276,C275,C277) FINDING I No. of years (N) 5 Present value (PV) \$0 Payment (PMT) -\$1,200 Future value (FV) \$10,000 =RATE(N,PMT,PV,FV) Interest rate (I) 25.78% =RATE(C284 ,C286,C285,C28 Would be tough to do!

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Chapter+5+Spreadsheet+Model - 05 Chapt er model Chapter 5...

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