P. 1
Financial Management

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11/15/2014

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# Useful formulas: 1.

Future value (lumpsum or one time investment): FV=PV(1+i)n where, FV=future value; PV=present value; i=interest rate per annum; n=number of years FV 2. Present value (lumpsum or one time investment): PV=-----------(1+i)n where, FV=future value; PV=present value; i=interest rate per annum; n=number of years. 3. Future value of immediate annuity(FVia): (where annuity means equal amount of cash flow)

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C C C PV C FV?? F F F F In immediate annuity, first cash flow occurs at the end of 1st year or beginning of 2nd year.

n ..........

PMT{(1+i)n – 1} FVia=-------------------- where, PMT = equal amount of cash flow every year. n=no. of cash flows. i 4. Present value of immediate annuity(PVia): (where annuity means equal amount of cash flow)

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C C C C PV?? FV F F F F In immediate annuity, first cash flow occurs at the end of 1st year or beginning of 2nd year.

n ..........

PMT{(1+i)n – 1} PVia=-------------------- where, PMT = equal amount of cash flow every year. n=no. of cash flows. i(1+i)n 5. Future value of due annuity(FVda): (where annuity means equal amount of cash flow)

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n .......... FV??

PV C C C C C In due annuity, first cash flow occurs at the beginning of 1st year.

PMT{(1+i)n – 1} FVda=-------------------- ×(1+i) where, PMT = equal amount of cash flow every year. n=no. of cash flows. i

..6. first cash flow occurs at the beginning of 1st year..×(1+i) where. Present value of due annuity(PVda): (where annuity means equal amount of cash flow) 0 1 2 3 4 n . FV PV?? C C C C C In due annuity.... n=no. i(1+i)n . PMT{(1+i)n – 1} PVda=-------------------.. PMT = equal amount of cash flow every year... of cash flows.

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