The cash flow of a firm can be described by its

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Unformatted text preview: given future amount, considering the return that can be earned on the current money. Present value is the inverse future value. The interest factor formulas and basic equations for both the future value and the present value of a single amount are given in Table 4.9. Find the future value and the present value of an ordinary annuity and find the present value of a perpetuity. An annuity is a pattern of equal periodic cash flows. For an ordinary annuity, the cash flows occur at the end of the period. For an annuity due, cash flows occur at the beginning of the period. Only ordinary annuities are considered in this book. The future value of an ordinary annuity can be found by using the future value interest factor for an annuity; the present value of an ordinary annuity can be found by using the present value interest factor for an annuity. The present value of a perpetuity—an infinite-lived annuity—is found using 1 divided by the discount rate to represent the present value interest factor. The interest factor formulas and basic equations for the...
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This document was uploaded on 03/03/2014 for the course MBA BMMF at Open University Malaysia.

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