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    Copy of TVOM template

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    lavender3042001
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    Copyright:

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    Download as xlsx, pdf, or txt
    4 views8 pages

    Copy of TVOM template

    Uploaded by

    lavender3042001
    uuuuuuuuuiui

    Copyright:

    © All Rights Reserved
    Download as XLSX, PDF, TXT or read online from Scribd
    Download as xlsx, pdf, or txt
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    RMIT Classification: Trusted #

    FUTURE VALUE OF A SINGLE AMOUNT


    Present value -800 Minus sign means cash outfl
    Annual rate of interest 6%
    Number of years 5
    Future value $1,070.58

    PRESENT VALUE OF A SINGLE AMOUNT


    Future value 1700 Positive sign means cash inf
    Annual rate of interest 8%
    Number of years 8
    Present value ($918.46)

    PRESENT VALUE OF AN ORDINARY ANNUITY


    Annual annuity payment 700
    Annual rate of interest 8%
    Number of years 5
    Present value ($2,794.90)

    FUTURE VALUE OF A MIXED STREAM


    Year Cash Flow
    1 -11,500
    2 -14,000
    3 -12,900
    4 -16,000
    5 -18,000
    Annual rate of interest 8%
    NPV ($56,902.30)
    Number of years 5
    Future value $83,608.15

    PRESENT VALUE OF A MIXED STREAM


    Year Cash Flow
    1 400
    2 800
    3 500
    4 400
    5 300
    Annual rate of interest 9%
    RMIT Classification: Trusted #

    Present value $1,904.76

    ANNUAL PAYMENT AMOUNT TO REPAY A LOAN


    Present value 6,000
    Annual rate of interest 10%
    Number of years 4
    Annual loan payment ($1,892.82)

    SOLVING FOR INTEREST OR GROWTH RATE OF AN SINGLE INVESTMENT


    Present value -1,250
    Number of years 4
    Future value 1,520
    Annual rate of interest 5.01%

    SOLVING FOR INTEREST OR GROWTH RATE OF AN ORDINARY ANNUITY


    Present value 2,000
    Number of years 5
    Annual annuity amount -514.14
    Annual rate of interest 9.00%

    SOLVING FOR THE YEARS OF A SINGLE AMOUNT INVESTMENT


    Present value -1,000
    Annual rate of interest 8%
    Future value 2,500
    Number of years 11.91

    DETERMINING THE NET PRESENT VALUE


    Firm's cost of capital 10%
    Year-End Cash Flow
    Year Project A Project B
    0 -42,000 -45,000
    1 14,000 28,000
    2 14,000 12,000
    3 14,000 10,000
    4 14,000 10,000
    5 14,000 10,000
    RMIT Classification: Trusted #

    NPV 11,071.01 10,924.40


    Choice of project Project A

    THE PROFITABILITY INDEX (PI)


    Year-End Cash Flow
    Year Project A Project B
    0 -42,000 -45,000
    1 14,000 28,000
    2 14,000 12,000
    3 14,000 10,000
    4 14,000 10,000
    5 14,000 10,000
    Present Value 53,071.01 55,924.40
    PI 1.26 1.24 Condition: PI > 1
    Choice of project Project A
    RMIT Classification: Trusted #

    Minus sign means cash outflow

    Positive sign means cash inflow


    RMIT Classification: Trusted #
    RMIT Classification: Trusted #

    Condition: PI > 1
    Max PI
    Class exercises

    Returns can be misleading

    Year Initial Capit 1 2 3 4 5


    Return 15% 20% 30% -20% 25% 14.0%
    100 115 138 179.4 143.52 179.4
    14% 14% 14% 14% 14%
    100

    Exercise #1
    If the interest rate if 15%, how long will it take to double your investment

    Exercise #2
    What is the PV of an annuity paying £100 if the interest rate is 3% per annum.

    Method 1
    PV=C/r 3333.333
    Method 2
    Using PV Function

    Exercise #3:
    Using an interest rate of 8%, what is the NPV and IRR for this cash flow?
    Rate 0.08
    Year 0 1 2 3 4 5 6 7 8
    Revenue 150 300 300 300 300 300 300 300
    Costs 250 50 100 100 100 100 100 100 100
    Cashflow -250 100 200 200 200 200 200 200 200

    ₫906.78 NPV
    63.51% IRR
    9
    300
    100
    200

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