公司理财第七版Chap005.ppt

3 Future Value - Amount to which an investment will grow after earning interest. Compound Interest - Interest earned on interest. Simple Interest - Interest earned only on the original investment. 5 Future Value - Amount to which an investment will grow after earning interest. Simple Interest - Interest earned only on the original investment. 12 Future Value - Amount to which an investment will grow after earning interest. Compound Interest - Interest earned on interest. 24 57 Present Value – Value today of a future cash flow 31 Discount Rate – Interest rate used to compute present values of future cash flows Discount Factor – Present value of a $1 future payment Present Value – Value today of a future cash flow 34 38 24 43 Note: The present value of an entire investment can be computed by summing the present values of each individual cash flow. 42 The total present value of the financed transaction is $15,133.06. Therefore you would save money should you choose to make payments instead of paying it all up front in cash. 44 Perpetuity – A stream of level cash payments that never ends. 47 57 Annuity – Equally spaced level stream of cash flows lasting for a limited period of time 50 Annuity – Equally spaced level stream of cash flows lasting for a limited period of time Annuity Factor - The present value of $1 paid every year for each of t years. 53 56 44 Annuity Due: Level stream of cash flows starting immediately. 54 Annuity Due: Level stream of cash flows starting immediately. 26 Effective annual interest rate: - Interest rate that is annualized using compound interest. Annual percentage rate: Interest rate that is annualized using simple interest. 26 Effective annual interest rate: - Interest rate that is annualized using compound interest. Annual percentage rate: Interest rate that is annualized using simple interest. 27 57 Inflation: The rate at which prices as a whole are increasing. 57 Inflation: The rate at which prices as a whole are i