HLST 3250 Midterm: HLST 3250 Test 2 Cheat Sheet

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There is value is getting the money now. Discounting cash flows what rate of return could we have invested today to get later (take future cash flows and figure out what they are worth today) Net present value calculate pv of cash flow and add (npv>0 accept project, uneven cashflows go in as fv); c is cash, Perpetuity a perpetuity is a type of annuity that receives an. Internal rate of return (solve for r in the pv eqn. ) discount rate that makes npv=0; if r>r then accept project; irr also known as breakeven discount rate; npv better to tell accept or reject r=discount rate, t=time =(cid:2159)/(cid:4666)(cid:2778)+(cid:2200)(cid:4667)(cid:2170) Fv (cid:2162)= (cid:4666)(cid:2778)+(cid:4667)(cid:2170) infinite amount of periodic payments; pv of a perpetuity is = (cid:2160)/(cid:2200) or =(cid:2169)(cid:2176)/; d is dividend or coupon per period and r of compounding over a given time period. (cid:2161)(cid:2174)=(cid:4672)(cid:2778)+(cid:2191)(cid:2196)(cid:4673)(cid:2196) (cid:2778) is discount rate.

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