Corporate Finance FINA4330
Summer 2016, Session 4
Extra credit questions (Optional Assignment)
Note: This is an option assignment. This will be helpful only to those who have earned lower
scores in the Midterms and Quizzes.
Solve the questions below to ea

Time value of Money & PV Short-cuts
PV =D F tC t=
1.
Discounting cash flows:
2.
Compounding cash flows:
3.
FV =C t (1+r )t
[
4.
Present value of Perpetuity:
C
PV =
r
5.
Present
of
value
[
]
annuity:
T
C
rg
n=1
9.
P 0=
ra m
1
m
Var ( r M )
from
CAPM:
=
CAP

Time value of Money & PV Short-cuts
PV =D F tC t=
Discounting cash flows:
Ct
( 1+r )
[
FV =C t (1+r )t
Compounding cash flows:
PV =C
Present value of Annuity:
(equal cash flows at regular intervals)
Present value of Perpetuity:
PV =
[
Present value of gr

Old Unit
Book Value
Depreciation
Selling Price
$ 250,000.00
$ 50,000.00
$ 275,000.00
Unit Cost
Shipping and Installation Costs
CAPEX
Inc in NWC
Depreciation
Salvage Value
$ 700,000.00
$ 50,000.00
$ 750,000.00
$ 40,000.00 +10,000 in years 1-4
$ 90,000.00 o

Time value of Money & PV Short-cuts
PV =D F tC t=
1.
Discounting cash flows:
2.
Compounding cash flows:
3.
Present value of Annuity:
FV =C t (1+r )
PV =C
[
Ct
( 1+r )
16.
t
t
1
1
r r ( 1+ r )T
]
(equal
cash flows at regular intervals until time T)
C
PV =