What are three methods used to calculate the present value of a future cash flow?
If the process of coming back to present value (PV) from future cash flows is called discounting, then the process of going to future value (FV) from present value (PV) is called compounding. (TRUE/FALSE)?_______________________ For a corporate bond, the quoted interest rate minus the real risk-free rate is equal to which of the following? Nominal interest rate Real inflation rate plus nominal interest rate Market risk premium The sum of inflation premium, default risk premium, liquidity premium and maturity risk premium
Present and Future Value of an Uneven Cash Flow Stream An investment will pay $200 at the end of each of the next 3 years, $400 at the end of Year 4, $500 at the end of Year 5, and $600 at the end of Year 6. If other investments of equal risk earn 9% annually, what is this investment's present value? Its future value? Do not round intermediate calculations. Round your answers to the nearest cent. Present value: $ ...
QUESTION 20 Under the free cash flow approach to valuation: o share value equals the present value of all free cash flows. share value is found by subtracting the value of debt and preferred stock from the enterprise value. O the enterprise value is found by discounting free cash flows at the required return on equity o the share value is found by multiplying free cash flows by the firm's weighted average cost of capital. O none of the above.
Present and Future Value of an Uneven Cash Flow Stream An investment will pay $100 at the end of each of the next 3 years, $400 at the end of Year 4, $600 at the end of Year 5, and $800 at the end of Year 6. If other investments of equal risk earn 6% annually. What is its present value? Round your answer to the nearest cent. What is its future value? Round your answer to the nearest cent....
Question 3 To find the future value of a stream of cash flows you just calculate the future value of each flow and then add them. True Question 7 A decline in the interest rate decreases the present value of those payments and the price of bonds. Trun
The present value of future cash flows: 3) increases as the discount rate decreases. O increases as the number of discounting periods increase. decreases as the number of discounting periods decrease. O decreases as the discount rate decreases.
26- What is the present value of the following cash flow stream at a rate of 13.5%? Years: 0 1 2 3 4 CFs: $0 $1,500 $3,000 $4,500 $6,000 27- What is the future value of the following cash flow stream at a rate of 13.5%? Years: 0 1 2 3 4 CFs: $0 $1,500 $3,000 $4,500 $6,000
Why do Investors and Companies Care about Intrinsic Value? The intrinsic value of a firm is determined by the size, timing, and risk of its expected future free cash flows (FCF). There are two models used to estimate intrinsic values: the discounted dividend model and the corporate valuation model. The discounted cash flow (or DCF) approach describes a method of valuing a project, company, or asset using the concepts of the time value of money. All future cash flows are...
Calculate the future value in 5 years of $2100 today with annual compounding and a 10% annual interest rate. Suppose someone saves $1000 today and will have $1052 one year from today. If compounding is daily (assume 365 days in a year), what must be the interest rate on this account? Jane offers Kathy the following deal. Jane will give Kathy $900 today if Kathy gives Jane $1100 in 2 years-time. Suppose there is quarterly compounding and the quarterly interest...
Calculate the future value in 5 years of $2100 today with annual compounding and a 10% annual interest rate. Suppose someone saves $1000 today and will have $1052 one year from today. If compounding is daily (assume 365 days in a year), what must be the interest rate on this account? Jane offers Kathy the following deal. Jane will give Kathy $900 today if Kathy gives Jane $1100 in 2 years-time. Suppose there is quarterly compounding and the quarterly interest...