Time Value Of Money

1) Future Value: The Cash flow which we receive in future is Future Value
eg.1
Future values and Present Values without using formula (cash outflow is not given)

Year Present Value Future Value

2000 75 150
2001 83 160
2002 68 140
2003 152 200
2004 91 170
2005 110 190
Net Present Value = 579

Eg.2) Cash Outflow is given

Year 2000 2001 2002 2003

0 1 2 3
Cash Flow -600 120 140 150

Discount Rate and Present Values 15% 104.34782609 105.860113 98.6274349

NPV 61.58
NPV by using formula 35.64

Eg.3)where Each Year P.V. Factors are calculated by using formula

Discount Rate 15%

Year 1 2 3 4

Cash Flow 16000 14000 18000 19000

Discounting Factors 0.87 0.76 0.66 0.57

Present Value 13913.04 12098.30 11835.29 10863.31

Net Present Value (without formula) 82690.03

Net Present Value (with formula) 81177.74
eg 4)
Nina purchased a stock expected to pay dividend of 40 in next year and 45.9 in the following year. As he receives the second d
657.87. What is net present value of the stock if he required rate of return 18%.

Year Dividend
1 40
2 45.9
2 657.87

Discount Rate 18%

NPV 467.26
 Name- Gauri Sanjay Chavan
Class- T.Y.BAF (B) 7242

Future values and Present Values with use of formula (cash outflow is not given)

Year Present ValueFuture Value

2000 130.43 150
2001 120.98 160
2002 92.05227254 140
2003 114.3506491 200
2004 84.520045 170
2005 82.14224322 190
NPV by using formula 624.48 15%

2004 2005 2005

4 5 5
130 160 400

74.32792 79.5482776477264 198.87069412

5 6 7 8 9 10

20000 17000 15000 12000 15500 11000

0.50 0.43 0.38 0.33 0.28 0.25

9943.53 7349.56913049646 5639.06 3922.82 4406.07 2719.03

ar. As he receives the second dividend, he plans to sell the stock for
en)

15/100
0.15