What Is Your Understanding of the Following Concepts; Present Value, Present Value of an Annuity, Future Value, and Future Value of an Annuity. (Please Describe Any Formulas Related to Each.)

Present Value is the current worth of a future sum of money or stream of cash flows given a specified rate of return. Future cash flows are discounted at the discount rate, and the higher the discount rate, the lower the present value of the future cash flows. Determining the appropriate discount rate is the key to properly valuing future cash flows, whether they be earnings or obligations.

Present Value of annuity is a series of equal payments or receipts that occur at evenly spaced intervals. Leases and rental payments are examples. The payments or receipts occur at the end of each period for an ordinary annuity while they occur at the beginning of each period; For an annuity due. PVoa = PMT [(1 - (1 / (1 + i)n)) / i]

Future Value is the value of an asset or cash at a specified date in the future that is equivalent in value to a specified sum today. There are two ways to calculate FV: For an asset with simple annual interest: = Original Investment x (1+ interest rate *number of years)) 2) For an asset with interest compounded annually: = Original Investment x ((1+interest rate)^number of years)

Future value of annuity is the value of a group of payments at a specified date in the future. These payments are known as an annuity, or set of cash flows. The future value of an annuity measures how much you would have in the future given a specified rate of return or discount rate. The future cash flows of the annuity grow at the discount rate and the higher the discount rate, the higher the future value of the annuity.

The current value of a set of cash flows in the future, given a specified rate of return or discount rate.The future cash flows of the annuity are discounted at the discount rate, and the higher the discount rate, the lower the present value of the annuity.

...Presentvalue is where the value on a set date of a future payment is discounted to reflect the time value of money and other factors. This can also apply to a series of future payments. Presentvalue calculations are commonly utilized in business and economics to provide a way to compare cash flows at different times. Presentvalue can be described as...

.... To find the PVA, we use the equation:
PVA = C({1 – [1/(1 + r)]t } / r )
PVA = $60,000{[1 – (1/1.0825)9 ] / .0825}
PVA = $370,947.84
The presentvalue of the revenue is greater than the cost, so your company can afford the equipment.
7. Here we need to find the FVA. The equation to find the FVA is:
FVA = C{[(1 + r)t – 1] / r}
FVA for 20 years = $3,000[(1.08520 – 1) / .085]
FVA for 20 years = $145,131.04
FVA for 40 years...

...Essay.
Net Presentvalue is the difference between an investment’s market value and its cost. For an example, you invest 100 dollars (Cost) into a lemonade stand but you receive 50 dollars (Market Value) of cash inflow. Another would be you buy a house for 50,000(Cost) But you sell it for 75,000(Market Value). Your net presentvalue An Investment should be accepted if the net...

...THE CONCEPT OF PRESENTVALUE SO IMPORTANT FOR CORPORATE FINANCE?
The importance of concept of presentvalue to the world of corporate finance is that presentvalue calculations are widely used in business and economics to provide a means to compare cash flows at different times. Present Value’s definition and simplistic formula used for normal...

...
Net presentValue, Mergers and acquisitions
Abstract
Main objective of undertaking this to report was learn about NPV presentvalue (NPV) method to make capital budgeting decision(Google NEW Project) and success factors involved in mergers and acquisitions(Google-Groupon Case).
Answers to the Assignments
Part I: Google should go ahead with the new project.
Part-II: Google’s acquisition of Groupon would have been win...

...-------------------------------------------------
FINC5001 Capital Market and Corporate Finance
-------------------------------------------------
Workshop 5 – Capital Budgeting II
1. Basic Concepts Review
a) In applying Net PresentValue, what factors do we include, and what factors do we ignore?
Use cash flows not accounting income
Ignore
* sunk costs
* financing costs
Include
* opportunity...

...Part I
A. PresentValue with Discount rate of 7% = 15000/(1+7%) = 15000/1.07 = $14,018.69
PresentValue with Discount rate of 4% = 15000/(1+4%) = 15000/1.04 = $14,423.08
B. Account A - PresentValue with Discount rate of 6% = 6500/(1+6%) = 6500/1.06 = $6,132.08
Account B - PresentValue with Discount rate of 6% = 12600/(1+6%)^2 = 12600/1.1236 = $11,213.96
C....

...Chapter 2
How to calculate Presentvalues
Question 6: Perpetuities
An investment costs $1,548 and pays $138 in perpetuity. If the interest rate is 9%, what is the NPV?
Answer
NPV = −1,548 + 138/.09 = −14.67 (cost today plus the presentvalue of the
perpetuity).
Question 7: Growing perpetuities
A common stock will pay a cash dividend of $4 next year. After that, the dividends are expected to increase...

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