5.Introduction to Valuation and Discounted Cash Flows

Question 1

Future value

Answer 1

Refers to the amount of money to which an investment will grow over a finite period of time at a given interest rate

FV=Original Amount( 1+interest rate per period)NUMBER OF PERIODS

Question 2

Present Value

Answer 2

Refers to the current worth of a future sum of money or stream of cash flows given a specified rate of return

PV= FV: (1+r)*T

Question 3

Value

Answer 3

CF1: (1+r)1 + CF2: (1+r)2 + CF3: (1+r)*3