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TIME VALUE OF MONEY

TIME VALUE OF MONEY


Company Receive Point of View:

The money which hold by the company today has more value then the money which will be receive in the future.

Company Payment Point of View:

The money which is paid by the company today has less value than the money which is paid in the future.

Future Value:

The value of present amount or Series of cash calculated at some interest rate for future time is called future value.

Present Value:

The value of future amount or series of cash Calculated at some interest rate for present time is called present value.

Interest:
The cost of used of borrow funds.
there are two types of interest
Simple interest
Compound interest

Example:
Suppose Amount 100000 interest rate 10% year 3

calculation of simple or compound

Simple interest:
1. 100000 * 10%=10000
2. 100000*  10%=10000
3. 100000*  10%=10000

Compound interset:
1. 100000* 10%=10000
2. 110000* 10%=11000                                (100000+10000)=110000
3. 121000* 10%=12100                                (110000+11000)=121000

Simple Interest Definacion:

The interest pay on principal amount is called simple interest.

Compound Interest:

The interest on interest is called compound interest.

Future Values Formulas:


simple interest formula:  FV=PV(1 + ni)
n= number of year
i= simple interest
PV= Present value
FV= Future value
                                                      n
Compound Interest: FV=(PV(1+i)

table formula: FV = PV x FVIF                     (FVIF) stand for future value interest factor
                                              i,n

Present Value Formulas:


simple interest: FV/1+ni   =PV

                                             n
compound interest: FV/(1+i)    = PV

table formula: PV=FV x PVIF
                                            i,m


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

MBA NOTES FINANCIAL MANAGEMENT
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