3. TIME VALUE OF MONEY

Question 1

can you compare or combine cash flows at different times?

Question 2

what is compound interest?

Question 3

how do you move a cash flow backward and forward in time?

Question 4

how do you calculate the present value and the future value of a cash flow stream?

Question 5

how do you calculate the net present value of a cash flow stream?

Question 6

what is the benefit to a company of accepting a project with a positive npv?

Question 7

how are the formulas for the present value of a perpetuity, annuity, growing perpetuity, and growing annuity related?

Question 8

what is the internal rate of return?

Question 9

what are the 3 rules of time travel concerning cash flows and their values?

Question 10

what is the term called for the phenomenon that the value of money today and in the future may be different?

Question 11

state the formula for discounting a cash flow at time n (annual interest r)

Question 12

you have different cash flows at different points in time. what is your approach to aggregate these values?

Question 13

define a perpetuity and how you can calculate its present value

Question 14

how does an annuity differ from a perpetuity? what is its formula to calculate its present value?

Question 15

what is the formula to calculate the present value of an annuity that keeps growing with rate g?

Question 16

explain intuitively why the present value of a growing perpetuity is infinite if g>= r-?

Question 17

when should an investment be undertaken according to the irr?

Question 18

plot the value of an annuity depending on the interest rate for different numbers of periods (es: for c=$1000)