FIN254 Case Time Value of Money Fall-2012 1) Assume that your father is now 50 years old‚ that he plans to retire in 10 years‚ and that he expects to live for 25 years after he retires‚ that is‚ until he is 85. He wants a fixed retirement income that has the same purchasing power at the time he retires as $40‚000 has today (he realizes that the real value of his retirement income will decline year by year after he retires). His retirement income will begin the day he retires‚ 10 years from
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Determining the Future Value of Education. Jenny Franklin estimates that as a result of completing her master’s degree‚ she will earn $6‚000 a year more for the next 40 years. [a] .What would be the total amount of these additional earnings? Answer . 1[a] $6‚000 × 40 = $ 240‚000 Therefore‚ The total additional earnings of jenny franklin = $ 240‚000. ……………………………………………………………………….. [b] What would be the present value of these additional
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Question 1 (5 points) $50 today is worth MORE than $50 tomorrow. Your Answer Score Explanation True ✔ 5.00 Correct. You understand Time value of money. False Total 5.00 / 5.00 Question Explanation We have assumed time value of money is positive. Question 2 (5 points) At an interest rate of 10% it is better to have $100 today than $120 in 2 years. Your Answer Score Explanation True ✔ 5.00 Correct; it is compounding! False Total 5.00 / 5.00 Question Explanation
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today’s value is the present value of an infinite stream of cash flows (i.e.‚ dividend). • But dividends are not fixed. • Not knowing the amount of the dividends—or even if there will be future dividends— makes it difficult to determine the value of common stock. • So what are we to do? Valuation Models • Dividend Valuation Model (DVM): – Constant dividend: Let D be the constant DPS: The required rate of return (re) is the return shareholders demand to compensate them for the time value of money
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life of 5 years. Using a discount rate of 8 percent‚ the net present value of all benefits is $1‚732‚836.16; the net present value of all costs is $1‚640‚384.79; the overall net present value is $92‚451.36‚ and the project breaks even in approximately 3.84 years. Using a 10 percent discount rate‚ the net present value of all benefits is $1‚645‚201.46; the net present value of all costs is $1‚576‚173.19; the overall net present value is $69‚028.27‚ and the project breaks even in approximately 4.04 years
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FINS1613 Business Finance Semester 2 – 2009 Version 1.0.3 Contents Page 3 Page 7 Page 10 Page 14 Page 18 Page 23 Page 26 Page 29 Page 32 Page 38 Page 42 Basic Concepts Introduction to Financial Mathematics The Valuation of a Firm’s Securities Capital Budgeting Capital Budgeting Applications – Part 1 Capital Budgeting Applications – Part 2 Risk and Return The Capital Asset Pricing Model Cost of Capital and Raising Capital Capital Structure Dividend Policy Copyright © Ka Hei Yeh 2009 First
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client’s predicted VO2 max of 32.3 ml . kg-1 . min-1 to normative values. 32.3 ml . kg-1
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Rate: 4% Years: 4 = $60‚422.02 Time Value of Money- TVM Future Value FV=PV*(1+i)^n FV= future value PV= present value i= interest rate n= time The Rule of 72 If at 10%‚ it will take 7.2 to double (just divide 72 by 10) 72 DIVIDED BY ANY NUMBER is how long it will take to double Present value PV=FV/(1+i)^n FV= future value PV= present value i= interest rate n= time Annuity= an individual present/future value IRA (10% compounding) Investor
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company‚ thereby retaining as much benefit as possible for existing shareholders. In practice‚ this return will be such as to provide new shareholders with the same future returns as existing shareholders expect to obtain on their investment at market values. For example if the future return on ABC plc’s shares is 15% and future return on new issue is 20% if this is viewed quite simplistically‚ investors would sell their existing shares and take up the new offer. The price of existing shares would fall
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precursor to decision d i i to proceed (feasibility phase) d (f ibili h ) Ongoing evaluation through design and planning phase Outline Session Objective & Context Financing projects Owner O Project Contractor Financial Evaluation Time value of money Present value NPV & Discounted cash flow Simple Examples Formulae IRR Missing factors Alberto De Marco 2 Financing Project Management Course Session Objective & Context The role of project financing p j g Mechanisms for project
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