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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
 Finance, Net Present Value, Valuation

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