Capital Investments &Time value of

money

Creating real value for Money

Lecture by Prof. Surabhi Jain

A dollar in hand worth more a

dollar promised in future
Money that you have
in your pocket today
can be used in so
many different ways
i.e consumption,
investment, Gift etc.
Money that you will
receive will actually
have less worth then
that you have now
because of Inflation

BASIC TVM FORMULAS

TVM & BUSINESS DECISION MAKING

TIME VALUE OF MONEY

CONCEPTS
SIMPLE INTEREST
Rs. 100 invested for 2 years @ 10%
p.a
P*r*t
100*.10*2=20 Rs
100+20= 120 Rs.

COMPOUND INTEREST
Rs. 100 invested for 2 years @ 10%
p.a
P*(1+R)^n
100*(1.10)^2=121 Rs

How can it be solved??????

Determine the value at the end of 3
years of a Rs.10,000 investment
(today) in a bank certificate of
deposit (CD) that pays a nominal
annual interest rate of 8 percent,
compounded Annualy.
(hint Future Value Lump sump
payment)

How can it be solved??????

Find the present value of 1,000 to be
received at the end of 4 years at a
nominal annualinterest rate of 12%,
compounded annually.
(Hint Lump sump payment)

How can it be Solved????

How much must you deposit at the
end of each year in an account that
pays an annual interestrate of 20
percent, if at the end of 5 years you
want 10,000 in the account?
(Hint annuity)

How can it be solved??????

Calculate PV for a Project X initially costing Rs.
250000. It has 10% cost of capital,it generates
Rs. 70000 each year for 5 years.

Calculate NPV for a Project X initially costing Rs. 250000. It has 10% cost of capital,it generates following cash flows

Methods to be adopted

TVM Table
Scientific Calc
Formula Method
Excel

(9739977680 SAPNA, MANAGEMENT)

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