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Ross_Chapter 6 - Chapter 6 Discounted Cash Flow Valuation...

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Chapter 6: Discounted Cash Flow Valuation FINA1003 Corporate Finance Faculty of Business and Economics University of Hong Kong Dr. Tao Lin
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Topics Covered y PV and FV of multiple cash flows y Annuity and perpetuity y Loan amortization y Annuity due and perpetuity due G d y Growing annuity and perpetuity y Interest Rates: APR, APY and EAR y Loan types and special financing
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Example Assume that the cash flows from the construction and sale from the construction and sale of an office building is as follows. Given a 7% required rate of return, find the present value and future value of the j t project. 000 300 000 100 000 150 2 Year 1 Year 0 Year , , , +
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PV of Multiple Cash Flows t=0 t=2 t=1 -$150,000 -$100,000 $300,000 $280,374 $300 000 $168,574 $180,374 $300,000
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