罗斯公司理财第六版习题答案第4章.doc

Chapter 4: Net Present Value Concept Questions - Chapter 4 4.1 ( Define future value and present value. Future value is the value of a sum after investing over one or more periods. Present value is the value today of cash flows to be received in the future. ( How does one use net present value when making an investment decision? One determines the present value of future cash flows and then subtracts the cost of the investment. If this value is positive, the investment should be undertaken. If the NPV is negative, then the investment should be rejected. 4.2 ( What is the difference between simple interest and compound interest? With simple interest, the interest on the original investment is not reinvested. With compound interest, each interest payment is reinvested and one earns interest on interest. ( What is the formula for the net present value of a project? T NPV = -C0 + ( Ct /(1+I)t t=1 4.3 ( What is a stated annual interest rate? The stated annual interest rate is the annual interest rate without consideration of compounding. ( What is an effective annual interest rate? An effective annual interest rate is a rate that takes compounding into account. ( What is the relationship between the stated annual interest rate and the effective annual interest rate? Effective annual interest rate = (1 + (r/m) )m - 1. ( Define continuous compounding. Continuous compounding compounds investments every instant. 4.4 ( What are the formulas for perpetuity, growing-perpetuity, annuity, and growing annuity? Perpetuity: PV = C/r Growing Perpetuity: PV = C/(r-g) Annuity: PV = (C/r) [1-1/(1+r)T] Growing Annuity: PV = [C/(r-g)] [1-((1+g) / (1+r))T ] ( What are three important points concerning the growing perpetuity formula? The numerator. The interest rate and the growth rate. The timing assumption. ( What are four tricks concerning annuities? A delayed a