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Unformatted text preview: increase sales. What is the NPV of this decision? Discounting ST Cash Flows 4 Other finance classes emphasize the importance of compounding in financial analysis. While this is meaningful for longterm (LT) decisions, simple interest calculations are adequate for ST decisions. We will often use a daily interest rate since firms invest in overnight investments or borrow money on credit lines daily. Quick TVM Review 5 To calculate PV using simple interest , the formula is: PV = FV / [1 + ( k )( n )] Where k = annual interest rate and n = # of years To modify the formula for a daily periodic interest rate: PV = FV / [1 + ( k )( n /365)] Annual rate times portion of year...
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 Spring '12
 VictorWakeling
 Valuation

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