Finance Topic 1 Flashcards
1
Q
Accounting rate of return formulae
A
2
Q
Discounting formulae
A
3
Q
NPV
A
Discounted cash flow method, discount all relevant cash flows to present value
4
Q
Profitability index
A
NPV per £ of initial capital outlay
Calculated - NPV divided by initial investment
5
Q
Internal rate of return
A
IRR
Yield earned on an inv over course of its economic life
Discount rate that causes NPV to be zero
6
Q
IRR formulae
A
Rule:
R1> 0
R2-r1 , or equal to 10%
7
Q
Annuity
A
Same cash flow every period
Finite number
8
Q
Perpetuities
A
Same cash flow each period
Forever
9
Q
Single future cash flow
A
10
Q
Formulae linking nominal and real inflation rates
A
11
Q
Conversion of inflation nominal vs real
A