formulas

Question 1

Future value (FV) is the value of a present amount of money at some future time.

Answer 1

FV = PV x (1 + r)^n
or
FV = A0 x (1 + r/m)^n

FV = future value
PV = present value
r = annual interest rate
n = number of year
m= number of times u get payed (annual =1)

Question 2

The present value (PV)

is a future amount that has been adjusted (discounted by some required
rate) to represent the amount in present day terms.

Answer 2

PV = FV / (1 + r)^n
or
PV = An / (1 + r/m)^n
where:

PV = present value
FV = future value
r = discount rate
n = number of periods

Question 3

ANNUITY
multiple sums of money to be received at some future time

Answer 3

PV annuity= A1/(1+k)^1 + A2/(1+k)^2 + … An/(1+k)^n

PV = present value of the cash flows
A1, A2, …, An = the cash flows in each period
k = the discount rate
n = the number of periods

Question 4

PERPETUITY
, involves periodic cash inflows of an equal amount for an infinite length of
time. The yield r on a perpetuity investment is given by

Answer 4

PV = A / r

where:

PV = present value of the perpetuity
A = the payment amount
r = the interest rate

Question 5

Average Rate of Return

Answer 5

ARR = (Average Annual Income from Investment (- taxes) / Initial Investment)

Question 6

Payback method

Answer 6

Payback Period = Initial Investment / Annual Cash Inflow

Question 7

Net Present Value
The net present value represents what remains after discounting all cash flows by the required
rate of return

Answer 7

npv= A0 + A1/(1+k)^1 + …