EXAMPLES AND FORMULA TIME VALUE OF MONEY

EXAMPLES AND FORMULA TIME VALUE OF MONEY

EXAMPLES 1

     A)     n=3   PV=100 i=100%,  10%,  0%    FV=?       

FV=PV (1+I)ⁿ  

WHEN  i=100%

FV=PV (1+I)ⁿ  

 =100(1+ 100/100)³

=100 (2)³ 

Fv=800

Same like  10% answer is 133.1   and  0% answer is 100

 FV cannot be calculated of 100 by table’s formula.

Ans: future value is more than calculated values.

EXAMPLE 2

N=3 FV=100 i=10% , 100%, 0%

When i=10%       10/100 = 0.1

PV = FV/(1+i)ⁿ

=100/(1+0.1)³

=75.13

Same the answer of 100% is 12.5  and  0% is 100

Present value is less than given value

Table formula PV=Fv x PVIF I,n =100 x PVIF 10%,3

x

x

Compound more than a year

Future value FV=PV(1+i/m)nxm M= semiannualy=2            (six month) M=quarterly=4 M=daily=360 M=12 monthly M=weekly=52 M=continuously=∞ FV=PV X (e) ixn TABLE FV=PV X FVIF i/m ,nxm FV=PV x eixn Constant  e= 2.7182

Present value PV=FV/(1+i/m)nxm m = ∞ FV/eixn   = PV PV=FV x PVIF i/m, nxm

FINANCIAL MANAGEMENT
DECISION AREA OF FINANCIAL MANAGEMENT
AGENCY PROBLEM
TYPES OF BUSINESS
FINANCIAL SYSTEM
FINANCIAL INTERMEDIARIES
TYPES OF FINANCIAL MARKETS
TIME VALUE OF MONEY
EXAMPLES AND FORMULA TIME VALUE OF MONEY
CASH FLOW,SUM,SERIES OF CASH, ANNUITY AND MIX STREAM
ANNUITY TYPES AND FORMULA
AMORTIZATION SCHEDULE OR TABLE WITH EXAMPLE
EFFECTIVE INTEREST RATE WITH EXAMPLE
VALUATION OF LONG TERM SECURITIES (BONDS)
TYPES OF BONDS
BONDS FORMULA,ZERO COUPON PERPETUAL
VALUATION OF LONG TERM SECURITIES (SHARE)
CASH AND MARKETABLE SECURITIES MANAGEMENT
MANAGING CASH INFLOW AND OUTFLOW
SECURITIES MANAGEMENT
SHORT TERM FINANCING
SPONTANEOUS LABILITIES
NEGOTIATED FINANCE
CAPITAL BUDGETING
CAPITAL BUDGETING TECHNIQUE
NET PRESENT VALUE TECHNIQUE
INTERNAL RATE OF RETURN TECHNIQUE
ACCOUNT RECEIVABLE MANAGEMENT
INVENTORY MANAGEMENT
FORCASTING

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